Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

MESSAGES FROM THE QUEEN

JAMAICA (GIFT OF A SPEAKER'S CHAIR)

THE VICE-CHAMBERLAIN OF THE HOUSEHOLD reported Her Majesty's Answer to the Address as follows:

I have received your Address praying that I will give directions for the presentation on behalf of your House of a Speaker's Chair to the House of Representatives of Jamaica, and assuring me that you will make good the expenses attending the same.

It gave me the greatest pleasure to learn that your House desires to make such a presentation and I will gladly give directions for carrying your proposal into effect.

TRINIDAD AND TOBAGO (GIFT OF A BOOKCASE AND A GAVEL)

The Vice-Chamberlain of the Household reported Her Majesty's Answer to the Address as follows:

I have received your Address praying that I will give directions for the presentation on behalf of your House of a bookcase containing Parliamentary and Constitutional reference books, together with a gavel for the Speaker, to the House of Representatives of Trinidad and Tobago and assuring me that you will make good the expenses attending the same.

It gave me the greatest pleasure to learn that your House desires to make such a presentation and I will gladly give directions for carrying your proposal into effect.

SUMMER TIME

THE VICE-CHAMBERLAIN OF THE HOUSEHOLD reported Her Majesty's Answer to the Address as follows:

I have received your Address praying that the Summer Time (1964)Order 1963 be made in the form of the draft laid before Parliament in pursuance of the provisions of Section 2 of the Summer Time Act 1947.

I will comply with your request.

Oral Answers to Questions — MINISTRY OF DEFENCE

Gurkha Brigade

Sir J. Smyth: asked the Minister of Defence if he will consider a revision of the 1948 agreement with Nepal to provide for a larger number of Gurkhas to be enlisted by the United Kingdom for the Gurkha Brigade.

The Minister of Defence (Mr. Peter Thorneycroft): As I stated on 20th November in reply to the hon. Member for Dudley (Mr. Wigg), it has been decided to make no reduction in the strength of the Gurkhas for the time being.

Sir J. Smyth: Does my right hon. Friend realise that, although our agreement with Nepal of 1948 allowed Britain eight battalions of Gurkhas and India 12 battalions, India, I am informed, has at present no fewer than 42 battalions of Gurkhas? I do not blame India for that, but, in view of the drop in British recruiting announced by the Secretary of State for War last Monday, will my right hon. Friend consider recruiting more of these very fine soldiers from Nepal who are extremely eager to serve with the British Army?

Mr. Thorneycroft: Like my right hon. and gallant Friend, I value highly the services of the Gurkhas, but I see no reason to increase their recruitment, which in any case is a long-term remedy, whereas deferment of planned run-down brings immediate benefit.

Mr. Healey: I support very strongly the request made by the right hon. and


gallant Member. Is the right hon. Gentleman aware that Gurkha troops have proved themselves exceptionally suitable for the rôle which British Forces have to perform in the Far East, notably in Malaysia and Hong Kong, and that there is at present a serious shortage of British troops in these areas? Will the Minister, therefore, reconsider the Government's proposal ultimately to cut Gurkha recruiting?

Mr. Thorneycroft: I do not accept that there is a shortage of British troops in those areas, and I emphasise that the rôle of the Gurkhas is world-wide.

Sir G. Nabarro: Does not my right hon. Friend agree that, whereas the recruitment and training of Gurkhas is a long-term policy, there are long-term difficulties in South-East Asia and the area is not likely to be pacified at an early date? Will he, therefore, read my speech last Monday wherein I asked for consideration of an increase in the Gurkha strength in the British Army from 14,600 to 20,000 Gurkhas?

Mr. Thorneycroft: I shall read my hon. Friend's speech with the same attention that I address to all his speeches. I emphasise again that it would be a great mistake for any of us to talk about the Gurkhas as being associated with one area only. They have a world-wide rôle.

Mr. Shinwell: Does the right hon. Gentleman know that many of us have pressed that no reduction should be made in the Gurkha strength of the British Army? Would he make it clear that the suggestion made the other day during the debate on the Order continuing the Army Act that the strength should be increased to 20,000 is hopelessly impracticable?

Mr. Thorneycroft: I do not know about it being impracticable. The Gurkhas are doing a very fine job. There is a good rô1e for them in the numbers which I have planned. I am not prepared to go further than that at present.

Sir J. Smyth: Will my right hon. Friend realise that the present position whereby the cuts announced on 14th March are not rescinded but are not at present being implemented is not very satisfactory to the people at the other

end, such as recruiting officers and the men who have to make up their minds whether or not to join the Gurkhas, and particularly to the British officers who have to decide whether or not to make a career in the Gurkhas? Will he consider making a rather firmer and longer-term statement on the whole policy of the recruitment of Gurkhas and British officers for Gurkha regiments?

Mr. Thorneycroft: I fully appreciate the force of my right hon. and gallant Friend's point about having some stability and certainty in these matters, and I will bear it in mind.

Abandoned War-time Sites

Mr. Ridley: asked the Minister of Defence if he will appoint a committee to investigate how best to achieve the speedy removal of abandoned war-time hostels, military camps and airfields in the United Kingdom.

Mr. Thorneycroft: No, Sir; but if my hon. Friend will let me know the details of what he has in mind, I will investigate the matter myself.

Mr. Ridley: Is my right hon. Friend aware that the country is covered with old sites which are not only eyesores but a very serious waste of agricultural land? Does he agree that Government policy in the past has made it extremely difficult, for financial reasons, to get these sites restored to their proper use? Will he take action in this matter? It is far too long since the end of the war to have these relics still disfiguring our countryside.

Mr. Thorneycroft: I am only suggesting to my hon. Friend that there are better ways of doing these things than by appointing a committee. Some of these sites are owned by my Department, some are not. I cannot do much about those which are not owned by my Department, but if my hon. Friend will let me know, in writing or verbally, precisely what his proposal is, I will do what I canto investigate it myself.

Mr. Pager: Is the Minister aware that these sites are worth to a small nation such as ours a value quite different from their worth to an individual owner? We cannot afford to leave our countryside cluttered up like this. Will the right hon. Gentleman co-ordinate his


policy with that of the Minister of Transport under which a lot of hard core is required for the road programme? If these two policies were co-ordinated it could make the clearance of these sites, as is certainly happening in a number of districts, very much cheaper. Will the right hon. Gentleman ensure that this road building opportunity is not missed?

Mr. Thorneycroft: I will certainly bear the point in mind.

Armed Forces (Transfer of Personnel)

Mr. Lipton: asked the Minister of Defence what arrangements are made to assist the transfer of Service men redundant in one Service to another of the Armed Services.

Mr. Thorneycroft: These arrangements are at this moment being worked out in consultation with the Services.

Mr. Lipton: Is the Minister aware that very large numbers of men in at least 13 trades in the Royal Air Force are being offered free discharges? Would it not be a pity if this valuable manpower were dissipated without any real attempt being made by somebody to see whether or not use can be made of their services either in the Army or the Navy?

Mr. Thorneycroft: There are 1,300 men who are redundant in the Royal Air Force. Steps are being taken to ensure that they are offered the opportunity of transferring to other Services.

Hunter and Sea Vixen Aircraft (Replacement)

Mr. Willis: asked the Minister of Defence when he expects to complete the project study for a replacement for the Hunter and Sea Vixen.

Mr. Thorneycroft: The project study has been completed but it raised a number of problems, the implications of which are the subject of further examination.

Mr. Willis: Is the right hon. Gentleman aware that that is what he has told us previously? Would he make it clear that it is still the Government's intention to proceed with a common aircraft for the Royal Air Force and the Royal Navy?

Mr. Thorneycroft: If the hon. Gentleman had heard my earlier reply, he would have known that there are difficulties in producing an aircraft capable of common operation from carriers and the land. I do not want to repeat the details of what I stated on an earlier occasion.

Mr. McMaster: When this aircraft is announced for the Navy, is it anticipated that it will have a vertical takeoff capacity?

Mr. Thorneycroft: The aircraft to which the Question refers is one with a vertical take-off capacity.

Mr. Healey: Is the Minister aware that there is serious concern in the aircraft industry at widespread reports that the Royal Navy is considering buying Phantoms and that the Royal Air Force is considering the purchase of foreign planes? Can he assure us that a decision will be taken on the future of the P.1154 in the next few weeks? Otherwise, the decision may, in effect, pass out of Her Majesty's Government's hands.

Mr. Thorneycroft: I am not in the least responsible for speculation in the newspapers, and I would not attempt to answer for it. My concern is to see that any operational requirement is properly studied and that no project is started which is bound to be very expensive, whatever the choice, without a full examination.

Arms Expenditure

Mr. Frank Allaun: asked the Minister of Defence if, in view of President Kennedy's declaration this summer of a moratorium on all United States nuclear test explosions in the atmosphere and of Mr. Khrushchev's decision to cut Soviet arms budgets whether or not the United States of America cuts hers, he will now consider making a cut in Great Britain's arms expenditure.

Mr. Thorneycroft: No, Sir. Our expenditure is kept to the minimum consistent with our own defence needs and with our obligations to our allies. These commitments have not yet been reduced, either by the Nuclear Test Ban Agreement or by any changes of policy by the Soviet Government.

Mr. Allaun: Does the Minister admit to the fact stated in the Question and, in addition, the serious proposals being made in certain quarters of the Senate, notably on 2nd August, for an immediate reduction of 10 per cent. in America's arms expenditure without waiting for international agreement? Is not this the moment when Britain should be moving in the same direction rather than increasing her expenditure as she is?

Mr. Thorneycroft: I would agree that there has been a Test Ban agreement, for which I think all hon. Members are thankful. I would also agree that Mr. Khrushchev will not build up a surplus of arms that he does not want, and nor will I. But that does not involve a decrease in the defence budget.

Mr. Driberg: Has the right hon. Gentleman considered the impact on British defence policy and expenditure of the important statement by Mr. McNamara a few weeks ago, in which he indicated that the Western defence experts had been wrong for 10 years in their estimates of Soviet forces, which are now thought to be only half what they were thought to be? Will the right hon. Gentleman take an early opportunity to make a statement on that?

Mr. Thorneycroft: The hon. Gentleman has misread Mr. McNamara's statement. He said nothing of which we did not have full knowledge or with which we disagreed. There is nothing in that statement which would lead to a reduction of British forces in Europe. Indeed, Mr. McNamara would be astounded if any such reduction were made.

Mr. Driberg: When the right hon. Gentleman says that I have misread the statement, is he saying that the lengthy report in The Times and the editorial comment in The Times—for which I realise that he is not responsible—were quite wrong?

Mr. Thorneycroft: I am saying that the hon. Gentleman's gloss on the report which he gave in his supplementary question was inaccurate.

Mr. Allaun: In view of the unsatisfactory nature of the reply, I beg to give notice that I will raise the matter on the Adjournment.

N.A.T.O. Multilateral Force

Mr. Healey: asked the Minister of Defence whether, following the discussions in Washington and Paris, he has now authorised British forces to participate in the proposed mixed-manning trials, in connection with the negotiations for a North Atlantic Treaty Organisation multilateral force.

Mr. Thorneycroft: No, Sir; but I think it likely that just as we have participated without any commitments in the talks, we would consider taking some part in an experiment associated with them.

Mr. Healey: Is the right hon. Gentleman aware that all the members of the Government party present at the Western European Union Assembly, meeting in Paris last week, supported the amendment of my right hon. Friend the Deputy Leader of the Opposition in opposing the multilateral force? Is the Minister aware that there is deep concern on both sides of the House that Her Majesty's Government may find themselves committed to support the multilateral force by a series of small administrative decisions, rather in the way that, in the end, they were committed to membership of the Common Market, although they went into the negotiations without any prior commitment?

Mr. Thorneycroft: I do not see why a willingness to discuss problems with one's friends or allies, or even to indulge in small experiments with them, necessarily commits one to courses which one does not wish to follow.

Mr. Gibson-Watt: Will my right hon. Friend note that although the hon. Member for Leeds, East (Mr. Healey) may speak for his side of the House, he must not speak for both sides of the House on an issue of this sort?

Mr. Ridley: As I was at the meeting of Western European Union and the hon. Member for Leeds, East (Mr. Healey) was not, may I ask whether my right hon. Friend is aware that we on this side were antagonistic to the idea of a nuclear executive for Europe but not necessarily antagonistic to the multilateral force, and that that was the


reason why we supported the amendment of the Deputy Leader of the Opposition?

Mr. Thorneycroft: This question of a multilateral force raises many and difficult issues; that is generally accepted. The Question refers to whether we would participate in an experiment. If the details of one were put before us, we would consider it, but that would not commit us to the enormous expense of going in for this multilateral force any more than would the discussions upon which we are now engaged.

Mr. Healey: Will the Minister at least maintain his opposition to the previous Foreign Secretary's views on this issue now that the previous Foreign Secretary is Prime Minister?

Mr. Thorneycroft: As the hon. Member knows, the Government speak with one voice in these matters.

New Equipment (Security)

Mr. Cronin: asked the Minister of Defence what security arrangements are put in hand when communications are made to the Press with regard to new equipment supplied to the three Services.

Mr. Thorneycroft: My instructions are that it should be given the maximum of information consistent with not disclosing knowledge which might be useful to an enemy.

Mr. Cronin: Will the Minister explain why photographs and hitherto secret details of the TSR2 were released to the Press and to potential enemies of this country? Is it not a fact that anyone with an elementary knowledge of aerodynamics could calculate the full operational performance of the TSR2 from this information? Is this not an occasion when the Government have dangerously compromised the security of a new aircraft for the purpose of party advantage?

Mr. Thorneycroft: I do not think so. Those details were released because it was not thought that they would really be of value to an enemy. One can exaggerate the importance of denying information, most of which is published in every technical journal here and in

America, and pretending that it is somehow a matter of security.

Mr. Cronin: We cannot let the right hon. Gentleman get away with this. Is he not aware that about a dozen Members, from both sides of the House, who were specially cleared for security were not permitted to sketch even a model of the TSR2 because of the enormous advantage to a potential enemy of obtaining such information?

Mr. Thorneycroft: It depends when they asked for it. If the hon. Member were to go along now, I should be happy to give him a model if it is of any help to him.

Mr. Mulley: Can the right hon. Gentleman explain why, at some date in September, it was possible to release this information whereas consistently during the history of this aircraft he and his right hon. Friends have refused information to hon. Members in answer to Questions in this House?

Mr. Thorneycroft: It is quite right in the early stages of development of an aircraft not to publish every detail of what one is doing, but when we are more advanced, as I am happy to say we are now, with the TSR2—which is a magnificent example of British engineering—I see no reason why we should be shy about it and I see no reason why we should not publish photographs of it.

Sarawak and Sabah (Military Situation)

Mr. Cronin: asked the Minister of Defence if he will make a statement on the military situation in Sarawak and Sabah.

Mr. Thorneycroft: I have little to add to the statement made by my right hon. Friend the Foreign Secretary on 25th November in reply to the right hon. and learned Member for Rowley Regis and Tipton (Mr. A. Henderson). Armed incursions, and intrusions by military aircraft, continue to be made from bases in Indonesian territory, and our forces continue to co-operate with those of the Malaysian Government in the protection of Eastern Malaysia.

Mr. Cronin: Bearing in mind the large concentrations of Indonesian troops on


the frontiers of these territories and the frequent violation of Malaysian air space, is the Minister satisfied that the Malaysian and British troops available are adequate for any emergency which might arise? Furthermore, can he reassure the House that every effort will be made to enable the Malaysian forces to participate more in the defence of their territories and, therefore, release British soldiers from this rather disagreeable and arduous task?

Mr. Thorneycroft: The ineffectiveness of the attacks so far and the competence with which they have been handled would seem to indicate that the forces are adequate. As to the Malaysians, theirs is the full responsibility for this area. Malaysia is a free and independent country and I entirely accept the view that the Malaysians should play an ever-increasing part in these events.

Mr. J. Griffiths: As one who recently had the opportunity of visiting Sabah and Sarawak, may I ask whether the Minister is satisfied with the provision of the means of communication between the various sections of the Army, and particularly the supply of helicopters and other aircraft, especially the Canadian one? Is he satisfied that this has been attended to?

Mr. Thorneycroft: I think so. I never say lightly that I am completely satisfied with equipment I intend to pay a visit to this theatre immediately after Christmas, in the first part of January. If the right hon. Gentleman will ask me when I return, I will give him a more informative answer.

Mr. Healey: I strongly support my right hon. Friend's reference to the need for helicopters in this theatre of operation. It was impressed upon all members of a recent Parliamentary delegation by those in the forces whom they met. Is there any indication of readiness by the Australian and New Zealand Governments to permit the participation in the campaign in Borneo of troops of the Commonwealth brigade now serving in Malaya?

Mr. Rankin: On a point of order. As I put down a Question on this topic to the Minister of Defence for today and it was transferred to the Commonwealth Secretary, how can the Minister of Defence answer it now?

Mr. Speaker: That does not raise a point of order for me.

Mr. Thorneycroft: The second part of the hon. Gentleman's Question raises a wider issue which, I agree, would be dealt with more appropriately by my right hon. Friend the Commonwealth Secretary. At least, it is separate from the Question which appears on the Paper today. I am not saying the final word about helicopters, but the requirement recently assessed by the commander-in-chief has been met in full.

Oral Answers to Questions — TELEPHONE SERVICE

Automatic Dialling, Hainault and Loughton

Mr. Biggs-Davison: asked the Postmaster-General whether, having regard to his latest plans for the improvement of the telephone service, he will now hasten the introduction of automatic dialling for the Hainault and Loughton exchanges.

The Assistant Postmaster-General (Mr. Ray Mawby): Automatic equipment, with provision for S.T.D., for new exchange sat Hainault and Loughton is now being manufactured. Both exchanges should be ready for service by about the middle of 1965; if we can improve on that timetable, we will.

Mr. Biggs-Davison: In view of the very ambitious programme of Post Office development which my right hon. Friend has announced to the House, will everything possible be done further to speed up this very modest improvement which would be most beneficial to the business and social life of my constituency?

Mr. Mawby: Yes, certainly.

Faults

Mr. A. Evans: asked the Postmaster-General the number of telephone fault 5 reported, for comparable periods during the years 1952–62, inclusive.

The Postmaster-General (Mr. Reginald Bevins): There are no statistics for the years prior to 1956. I will, with permission, circulate the figures for subsequent years in the Official Report. They show a progressive improvement.

Mr. Evans: In thanking the Postmaster-General for that reply and for the figures which he is circulating in the OFFICIAL REPORT, may I ask whether he is satisfied that the efficiency of this section of his Department is as high and sustained as it might be?

Mr. Bevins: I am never satisfied with anything, but about 77 per cent. of faults are cleared on the day they are reported.

Mr. Gresham Cooke: Is my right hon. Friend aware that there is a lot of complaint in the London area about no pick-up calls, particularly in the telephone area in my constituency? Is he aware that these things do not get reported and that, therefore, unless the maintenance is very good, there is no way of having it put right?

Mr. Bevins: I have that matter under consideration.

Following are the figures:

The following figures show the number of reports made to the fault repair service and the average number of reports per telephone during the period 1956–1962. inclusive.


Year ending 31st December
Total Reports
Average Reports per Telephone


1956
…
…
9,140,000
1·34


1957
…
…
8,950,000
1·25


1958
…
…
9,050,000
1·24


1959
…
…
8,890,000
1·19


1960
…
…
9,200,000
1·18


1961
…
…
9,360,000
1·14


1962
…
…
9,730,000
1·14

Mr. A. Evans: asked the Postmaster-General to what extent telephone subscribers are reimbursed for periods when their telephones are out of order.

Mr. Bevins: Subscribers are not entitled to reimbursement for periods when their telephones are out of order, but telephone managers have discretion to make rebates in individual cases. More than three-quarters of all faults are cleared on the day they are reported; most of those carried over are reported late in the day and are cleared on the following day. If the hon. Member has a particular case in mind I will gladly look into it.

Mr. Evans: Is the Minister aware that there appears to be an increasing number

of faults which are not remedied within the 24 hours? Will he remember, first, his monopoly position in this respect and that it is his business to satisfy subscribers as far as possible? Will he also bear in mind that the telephone is becoming indispensable to more and more people as each month passes? Will he try to make certain that the reliability of his service is attended to with the same care with which he attends to the promotion of technical improvements?

Mr. Bevins: Yes. I have all those considerations in mind, but the fact is that the proportion of faults which are reported is falling constantly.

Mr. Mason: Will the right hon. Gentleman reconsider the matter and try to make telephone rental reimbursement an established practice? Is he not aware that because of the rapid change-over which is now taking place from manual to automatic exchanges, some subscribers suffer long delays for engineering maintenance because many of the lines are temporarily out of order? Secondly, there may be branches of a union which occasionally might be working to rule. This is not the fault of the subscribers but, nevertheless, their telephones may be delayed unnecessarily for repair. Is the right hon. Gentleman aware that there is a shortage of 500 in the technical grades in London and that more are required in those grades in the provinces and that, therefore, until the situation is rectified, reimbursement for telephone rentals should be a recognised practice when the delay is unusually long?

Mr. Bevins: I am aware of all those factors. From the viewpoint of a residential telephone, however, the value is less than 1s. a day and to give rebates automatically would increase our costs out of all proportion to the amounts involved.

Irvine

Mr. Manuel: asked the Postmaster-General if he is aware of the inadequate telephone facilities in the new housing areas in the Burgh of Irvine; how many applicants are awaiting installations; what is the average waiting time for installations; and what steps he proposes to take to speed up the provision of telephones in this area.

Mr. Mawby: My right hon. Friend is sorry about the delays in providing telephones in new housing areas in the Burgh of Irvine, where there are 67 orders on the waiting list. In consequence of the plans announced in the recent White Paper on the Inland Telephone Service, the position is now being reviewed with a view to speeding up matters.
The composition of the waiting list is constantly changing, and I am sorry that we cannot give a reliable average waiting time.

Mr. Manuel: I am very pleased that the Assistant Postmaster-General is to review the position, but is he aware, and will he inform his right hon. Friend if he does not know, that the local authority in this area has undertaken an onerous financial burden in order to open up an industrial estate, and has brought many factories there? Should he not measure up to the initiative of the local authority and have his Department moving at the same speed to provide the necessary services to help industrial communications in that area?

Mr. Mawby: I agree completely with the hon. Gentleman. It is our aim to make certain that we can keep in line. But I would remind the House that the Question refers to two new housing estates, and that, with many thousands of new housing estates developing throughout the country, there are times when we might lag a little. Nevertheless, with the reorganisation and special attention that is being given, we hope to be a little ahead in the future.

Lichfield (Overspill Area)

Mr. Snow: asked the Postmaster-General why there is continued inadequate provision of telephone lines for industry going into the overspill area in the neighbourhood of Lichfield.

Mr. Mawby: I understand that in the overspill area there are no people waiting for business telephones, but there are a number of outstanding applications for home telephones on new residential estates where cable laying is in progress.
The hon. Member has written to my right hon. Friend about delay in giving residential telephone service to an applicant in an adjoining area. I am looking

into the particular case to which the hon. Member has drawn my right hon. Friend's attention and will write to him as soon as possible.

Mr. Snow: Is the hon. Gentleman aware that evidently his Departmental intelligence is very seriously lacking? Is he aware that on many occasions I have drawn his attention to the inadequacy of lines for the overspill area requirement, both industrial and private, and since it is a part of national policy to transfer industry and the population attached to industry to the overspill receiving areas, will he look into this matter again? What is the use of advertising that more telephones are available if industrialists cannot get them?

Mr. Mawby: Yes, Sir. Of course, there is no point in advertising unless the telephones are freely available. It is obvious that this is one of the difficult areas. As I have said, I am looking into this particular matter, and I will look at the wider issue again as well.

Mr. Snow: I have raised it four times.

Capital Investment

Mr. Dempsey: asked the Postmaster-General if he will state the total capital investment in the manufacture of telephones and telephone communications for the current year; and what value and percentage is being manufactured in Scotland.

Mr. Fernyhough: asked the Postmaster-General what percentage of the contracts, expressed in money terms, in connection with his £900 million capital investment programme during the next five years will go to firms in Scotland, Northern Ireland and Aycliffe, respectively.

Mr. Mawby: My right hon. Friend expects to spend about £80 million on supplies of this equipment during the current year. Of this, about 1½ per cent. will be spent in Scotland, and about 1¼ per cent. in Northern Ireland. He is sorry that he cannot forecast in detail how orders will be placed in future years, but at present this equipment is not produced in any great quantities in Scotland, Northern Ireland or Aycliffe. Firms in these areas get


the benefit of the Government's preferential scheme for development districts, and we hope they will take increasing advantage of it.

Mr. Dempsey: Is the Assistant Postmaster-General aware that if the share-out were based on the use by Scotland of telephones Scotland would get 10 per cent. of this particular share out? Does he further realise that if it were based on Scotland's unemployed population the amount would be 20 per cent? Is it not shameful, therefore, to say to Scotland, with its 100,000 workless, its idle factories, and capable management, "All you are going to receive is 1½ per cent."? Is not this a miserable way to treat Scotland? Will the hon. Gentleman have another look at this and at least give Scotland a fair share of his Department's orders?

Mr. Mawby: While I sympathise completely with the hon. Gentleman and his constituents, the fact of the matter is that there are very few firms in Scotland which make telecommunications equipment. As I said earlier, a preferential scheme operates, and wherever a firm decides to move under the preferential treatment arrangements and decides to offer facilities to build telecommunications equipment, then naturally we will look very seriously at its application

Mr. Fernyhough: Will the hon. Gentleman draw the attention of the Minister of Housing and Local Government and Minister for Welsh Affairs to the figures which he has just given? Does he realise that the figures he has just given are a complete contradiction of the impression which the Minister tried to convey when winding up the debate last Wednesday? In that debate his right hon. Friend—[Hon. Members: "Speech."]—tried to convey the impression that in Scotland, Northern Ireland, and in the North-East we should benefit considerably from this new investment programme. Will the hon. Gentleman draw the attention of his right hon. Friend to how he has misled the House in this respect?

Mr. Mawby: I do not see that my right hon. Friend has misled the House at all. In fact, there is no reason at all why development areas should not get a large amount in the future, providing the factories are there; but we cannot issue contracts unless there are people

engaged there who are prepared to develop. For instance, there is a particular factory which is in course of construction in Aycliffe. If this particular factory decides to produce telecommunications equipment, we will obviously consider very seriously its application and whether we can give it some work, but unless it can offer such facilities we can do very little about it.

Telephone Equipment (Contracts)

Mr. Fernyhough: asked the Postmaster-General if he will give a list of the firms to which he has allocated contracts for telephone equipment in the last five years; what was the value of the respective contracts with the respective firms; and where the firms are situated.

Mr. Mawby: My right hon. Friend regrets that he cannot readily provide this information, which would take some time to compile. We have available, however, a break-down of Post Office orders in 1962–63 for cable, loading coils, telephone apparatus and exchange equipment which, with permission, my right hon. Friend will publish in the Official Report.

Mr. J. Wells: Can my hon. Friend indicate what telephone equipment, if any, is purchased from the Prison Commissioners, or their successors in business?

Mr. Mawby: Not without notice.

Following is the break-down:

Post Office orders in 1962–63 for Cable, Loading Coils, Telephone Exchange Equipment and Telephone Apparatus.

Cable

All orders were placed with firms party to the bulk supply agreement.

£


Connollys (Blackley) Ltd.
520,000


Hackbridge Cable Co. Ltd.
360,000


Pirelli-General Cable Works Ltd.
1,422,000


Standard Telephones &amp; Cables Ltd.
2,425,000


British Insulated Callender's Cables Ltd.
2,131,000


Telephone Cables Ltd.
4,193,000

Loading Coils

All orders were placed with firms party to the bulk supply agreement.

£


Salford Electrical Instruments Ltd.
230,000


Standard Telephones &amp; Cables Ltd.
250,000


Associated Electrical Industries Ltd.
120,000

Telephone Exchange Equipment

(a) Firms party to the bulk supply agreement.

£


Automatic Telephone &amp; Electric Co. Ltd.
4,628,000


Ericsson Telephones Ltd.
7,880,000


Standard Telephones &amp; Cables Ltd.
4,849,000


Associated Electrical Industries Ltd.
5,632,000


The General Electric Co. Ltd.
6,046,000

(b) Other firms.

Telephone Manufacturing Co. Ltd.
184,000


Whiteley Electric Radio Co. Ltd.
2,000

Telephone Apparatus

(a) Firms party to the bulk supply agreement.



£


Automatic Telephone &amp; Electric Co. Ltd.
977,000


Ericsson Telephones Ltd.
708,000


The General Electric Co. Ltd.
1,183,000


Phoenix Telephones Ltd.
1,278,000


The Plessey Co. (U.K.) Ltd.
1,046,000


Standard Telephones &amp; Cables Ltd.
1,057,000


Telephone Manufacturing Co. Ltd.
1,049,000


Associated Electrical Industries Ltd.
1,162,000

(b) Other firms.


The Pye Group
315,000


EMI Electronics Ltd.
188,000


Whiteley Electrical Radio Co. Ltd.
60,000


Labgear Ltd.
1,000

Oral Answers to Questions — WIRELESS AND TELEVISION

Pay-Television Experiments (Licences)

Mr. Mason: asked the Postmaster-General what conclusions he has now reached with regard to experimental pay-television services.

Mr. Bevins: I now propose to offer licences for pay-television experiments to the following five groups for a period of three years:

(1) Caledonian Television Ltd. in Penicuik, near Edinburgh, with a possible extension later elsewhere in Scotland.
(2) Choiceview Ltd. in Leicester with the option of an extension in a London area.
(3) Pay-TV Ltd. in

(i) Sheffield.
(ii) Certain London Boroughs, with a start initially in Westminster and Southwark.

(4) Telemeter Programmes Ltd. in

(i) An area in the north of England.
(ii) A London area comprising Merton, Mordern, Mitcham and Wimbledon.


(5) Tolvision Ltd. in

(i) A grouped area encompassing Luton and Bedford, and stretching I should hope into towns in Hertfordshire.
(ii) A London area.


The five companies are entirely independent of each other in control and finance. I hope the areas chosen will help them to develop a variety of approach, as well as covering a good cross-section of the community and forming a reasonably practical basis for an experiment.
The issue of licences will of course be dependent upon the companies accepting its conditions, including the necessary statistical returns for which I shall ask and the devising of adequate safeguards for the legitimate interests of cinema exhibitors in the experimental areas; on this I am in consultation with my right hon. Friend, the Secretary of State for Industry, Trade and Regional Development. I shall also need to be satisfied about the structure of each company before I actually issue licences.
I will keep the House informed on the progress of the experiment. I shall put a copy of the licence and other documents in the Libraries of both Houses as soon as they are in their final form.
I shall expect all the companies to start their services within one year from the date of issue of licences.

Mr. Mason: I am much obliged to the right hon. Gentleman for that statement. Is he aware that whilst not opposing this experiment, we are rather surprised that it should get this priority in the future development of broadcasting and television, especially having in mind that it will be a discriminatory medium, which, on cost alone, will squeeze out a number of old-age pensioners, the permanently sick and disabled, and persons in the lower income groups? Has he told all the companies concerned that this is purely an experiment, that a national pay-television service will not automatically follow, that there will be no advertisements on this medium, and that it will also be subject to the code of conduct embodied in the present Television Act? Could he also inform the House how many subscribers will be initially on this medium and, although he is not directly


financing, I understand, these five companies or assisting them financially in developing this medium, what will be the cost of the service that he will allow them to use?

Mr. Bevins: I will try briefly to answer the hon. Gentleman's supplementry questions. First, people are entirely free to decide whether or not they take pay-television services. The services do not use frequencies of any sort; they are by wire. No advertisements will be allowed. The contractors will operate under the general requirements as regards the code of behaviour set out in Section 3 of the 1954 Television Act. As we said in the White Paper, there could be no guarantee at this stage of a permanent service but we would have to see what sort of television is produced. If it is good and popular television, I have no doubt that Parliament would wish to go further.

Mr. Stratton Mills: While welcoming what my right hon. Friend has said, may I ask whether he can give an assurance that he will watch as far as possible that these firms do not compete with the normal programmes on either Independent Television or the B.B.C. channel, and that he will try to ensure that they bring to the viewer programmes which they would not otherwise see?

Mr. Bevins: In general, I can give my hon. Friend that assurance. I think that the sort of television that will be provided by these companies will be distinctly different from both that of the B.B.C. and the I.T.A., and, of course, they will be barred from "hogging" events of national importance for their programmes. I have also made it clear to the B.B.C. and the I.T.A. that if they feel that they are being unfairly dealt with regarding this experiment they can always make representations to me.

I.T.A. Programme Contractors

Mr. Frank Allaun: asked the Postmaster-General if, in view of the increasing concentration of newspapers in a few hands and the growing influence on public opinion of a handful of newspaper proprietors, he will introduce legislation to enable him to exercise

supervision over the choice of programme contractors for the Independent Television Authority.

Mr. Bevins: No, Sir. We had very full discussion about the Press and television during the debates on the Television Act, 1963. Under that Act I and the Authority have been given powers which will be a sufficient safeguard against the possibility that the existence of newspaper holdings in a programme company might lead to results contrary to the public interest.

Mr. Allaun: Is it right that Beaver-brook Newspapers Ltd. should have any part in the control of a television programme added to its existing circulation and influence on men's minds? Does not the Postmaster-General think that this is a potential threat to democracy and that it should be stopped by law? If not, at least would he have a word in the ear of Lord Hill, the Chairman of the I.T.A.?

Mr. Bevins: We discussed this matter in principle very fully during our debates on the Television Bill a few months ago. Unhappily, the question which the hon. Gentleman asks is not one for me to answer. It is a matter for the Authority to decide where contracts go.

Mr. P. Noel-Baker: Is the Postmaster-General aware that recent developments in the newspaper world have made it very difficult for us to use the phrase "a free Press" with the confidence with which we used to use it, and will he give further consideration to the proposal made by my hon. Friend?

Mr. Bevins: No. As I say, the House gave the most exhaustive consideration to this subject only a few months ago, and I think that the decisions which we reached were right.

Mr. Emrys Hughes: To what extent does the Postmaster-General now exercise supervision over television programmes? Has he exercised any influence over the excellent programme "That Was The Week That Was"? Is he aware that if he told the B.B.C. that this programme should be continued in a General Election year so that politicians could be debunked he would be doing an excellent national service which would be very much appreciated?

Mr. Bevins: That may be true, but the hon. Gentleman is in the wrong shop. This Question refers to the I.T.A., not the B.B.C.

V.H.F. Television Channel, South Wales

Mr. Gower: asked the Postmaster-General whether he has now agreed to the Independent Television Authority's request to be allowed to use a second very high frequency television channel in South Wales to enable viewers in South Wales and the West of England to have their own editions of the Independent Television service next year.

Mr. Bevins: I have agreed in principle that the Authority may transmit on Channel 7 at its St. Hilary Station in South Wales as from the middle of next year. The Authority intends to appoint a programme contractor to serve the whole of Wales and the West of England area and needs this additional channel to provide distinctive Welsh programmes in South Wales at peak viewing hours.

Mr. Robert Cooke: Would my right hon. Friend bear in mind that this is welcome news, as a temporary expedient, but that the real solution is that the West of England and Wales should be dealt with by separate independent companies? Will he try to make a definite statement on that as soon as possible?

Mr. Bevins: In view of my reply to an earlier question by the hon. Member for Salford, East (Mr. Frank Allaun) I think I had better be rather circumspect in what I say, but I am sure that the Authority will take note of my hon. Friend's suggestion.

Oral Answers to Questions — ROYAL NAVY

The Clyde (Radioactivity)

Mr. Rankin: asked the Civil Lord of the Admiralty how many tests for radioactivity in the waters of the Clyde were made during 1962; and what were the results.

The Civil Lord of the Admiralty (Mr. John Hay): Two surveys were made in 1962 in connection with the presence of U.S. nuclear-powered submarines in the Holy Loch. The results showed no

increase in radioactivity levels attributable to them.

Mr. Rankin: Besides helping to keep the waters of the Clyde clean, would the hon. Gentleman see what he can do to keep Dunoon clean, in view of the fact that he has some responsibility for Polaris on Clydeside? Is he aware that the most recent vital statistics, published in Scotland yesterday, show that in Dunoon there has been an increase of 400 per cert. since 1961 in the number of illegitimate births, and that that is disturbing the city council very seriously indeed—

Mr. Speaker: Order. I do not relate that matter to the form of radioactivity we are thinking of on the hon. Member's Question.

Mr. Rankin: Mr. Speaker, I am not sure whether it is radioactivity or the American activity, but I think it deserves the consideration of the Minister in view of the fact—

Mr. Speaker: Order. The one would be in order on the particular Question, but the other would not. That is the difference.

Mr. Rankin: On a point of order. Are you ruling, Mr. Speaker, that American activity is in order, but the other aspect not?

Mr. Speaker: I am simply ruling that in so far as it related to purity, as against radioactivity, then the hon. Member's supplementary Question was in order, but that the rest of it, as far as I remember it, was not.

Mr. Rankin: Is it not the case that the Minister does have some responsibility for both types of activity? All I ask is that he should get in consultation with the city council and the Americans, with his own representatives to see what can be done to modify this situation.

Mr. Hay: I am not quite sure how much of that supplementary question I should answer. All I can say is that I am not really responsible for illegitimate births in Dunoon.

Fishery Protection Squadron

Mr. Wall: asked the Civil Lord of the Admiralty what steps he proposes to take to reinforce the Fishery Protection Squadron.

Mr. Hay: There is no evidence that the squadron is inadequate for its task but if circumstances indicate otherwise the position will be urgently reviewed.

Mr. Wall: Of course we appreciate the excellent work done by the squadron, but is it not the case that during last summer well over 200 foreign trawlers were fishing off the Yorkshire coast at a time when the fishery protection vessel was off station for a refit? Will my hon. Friend consider extending the cover by the squadron by the use of helicopters and fast patrol vessels?

Mr. Hay: All these matters are constantly under review. We are pretty widely extended at the moment but I will take account of what my hon. Friend says.

Mr. Hector Hughes: What is the present strength of the squadron in comparison with foreign fishery protection squadrons which have recently been so active in the Scottish fishing grounds?

Mr. Hay: Our squadron consists of four frigates, four coastal minesweepers and two inshore minesweepers, and, from time to time, two fast patrol boats are deployed. I cannot answer the latter part of the hon. and learned Member's supplementary question because I am not sure to which other squadrons he is referring.

Polaris Submarines

Mr. Wall: asked the Civil Lord of the Admiralty when the first of the Polaris submarines will be laid down, and when she is expected to be launched.

Mr. Hay: Work on the first Polaris submarine has made a good start and construction is going according to plan. The submarine is expected to be laid down early next year. It is not the practice to give notice well in advance of the dates of launching warships being built for the Royal Navy.

Mr. Wall: The time taken to construct "Valiant" was a considerable improvement on the time taken to construct "Dreadnought". Will my hon. Friend see that this improvement is continued in the building of the new Polaris submarines?

Mr. Hay: I hope that we can give that assurance, although Polaris boats are rather more complex than hunter-killers.

Oral Answers to Questions — BRITISH ARMY

7·62 mm. Rifle (Telescopic Sight)

Mr. Shinwell: asked the Secretary of State for War what progress has been made in developing a suitable telescopic sight for the 7·62 mm. rifle; why the production of a sight has been delayed; and what tests the sight had passed before its use by the Army.

The Under-Secretary of State for War (Mr. Peter Kirk): A telescopic sight for the 7·62 mm. rifle has undergone trials to test continuous firing, accuracy and its ability to resist extremes of climate and rough usage. A decision cannot be taken about production until the evaluation of the results has been completed.

Mr. Shinwell: Is the hon. Gentleman aware that, while the War Office has delayed these trials, American troops are almost fully equipped with the telescopic sight and that the same applies to certain Continental countries associated with N.A.T.O.? Why has the War Office been so dilatory in providing what is regarded as modern and essential equipment?

Mr. Kirk: I do not think that we have been dilatory. This project was not high on the priority list because the existing ·303 sniping rifle, although not of the standard N.A.T.O. calibre, was adequate and the requirement for it was extremely small.

Mr. Paget: We were using telescopic sights in the South African War. Did it not occur to the War Office that, when we got a new rifle, we should require a telescopic sight for it? Why has it taken 12 years to get round to this discovery?

Mr. Kirk: Of course it occurred to us, and that is why we are carrying out tests on it.

Mr. Shinwell: Though this is the first time this matter has been ventilated in the House, may I have an assurance


that these trials will be expedited and that, if the sight proves to be satisfactory, our troops will be provided with it as early as possible?

Mr. Kirk: We hope that, once the trials are completed, the Army will begin to receive the sights about 18 months later.

N.A.A.F.I. Club, Colchester

Mr. Buck: asked the Secretary of State for War what decision has been arrived at in consultation with the Navy, Army and Air Force Institutes with regard to the future of the former Navy, Army and Air Force Institutes club in Colchester.

Mr. Kirk: As my hon. Friend was told in the letter my office sent him on 16th September, this club was built by the N.A.A.F.I. on land within the garrison area leased from the War Department in 1946. N.A.A.F.I. has since ceased to run the club and the building is now unused. The Army could use this building in the short term and we are negotiating with the N.A.A.F.I. for the termination of the lease.

Mr. Buck: Is not my hon. Friend aware that these large and valuable premises have now been empty and idle for over two and a half years? Can he tell us the cause of the hold-up and why they have been kept so long without being utilised for any purpose, either military or civil?

Mr. Kirk: We are negotiating with the N.A.A.F.I. a suitable price on which we could take them over. The difficulty of turning these buildings over to civilian use is that they are in the middle of barracks.

Mr. Buck: But what is the hold-up? Why have not the N.A.A.F.I. and the War Office been able to sort out this matter in two and a half years?

Mr. Kirk: We have not been able to agree on a price.

Royal Ordnance Factory, Pembrey

Mr. J. Griffiths: asked the Secretary of State for War whether it is still his intention to close down the Royal Ordnance factory at Pembrey; and what

plans he his to ensure that this factory, which is situated in an area scheduled under the Local Employment Act, is used to provide employment for the workers who would be rendered redundant by its closure.

Mr. Kirk: As my right hon. Friend explained to the right hon. Gentleman in his letter of 2nd December, we expect the factory to close at the end of next year. Some of our employees have already found new jobs in the area, and others will no doubt do so during the coming months. I regret that we cannot ensure that the factory will continue to provide employment after we have vacated it, but we intend to offer it for sale at about the time it closes, and we shall do everything possible to interest prospective purchasers who might use the property productively.

Mr. Griffiths: Does the hon. Gentleman realise that, of the 450 men now left but who will be without a job at the end of next year, more than half are over 50, each with at least a quarter of a century's service to the nation in war and peace? Does his Department not accept full responsibility for providing alternative employment? Is he aware that this site is the most important and valuable in Carmarthen County? Will he consult the Board of Trade as to whether the factory, with all its services, could be used as a trading estate?

Mr. Kirk: We are aware of the obligation towards our employees and we will do all we can to ensure that they are found jobs. We are already in touch with the Board of Trade and with the other Government Departments concerned. But this factory has to be decontaminated before it can be used for any other purpose.

Mr. Paget: This closure, I gather, is in addition to the closure of Woolwich and of other ordnance factories. In view of the state of equipment, particularly the artillery—which is, in the main, equipped with last war or even pre last war designs—the Army will be extremely surprised to hear that what we are suffering from, and have been suffering from, is an excess of capacity.

Mr. Kirk: They may be surprised to hear it but it is true.

Lady Megan Lloyd George: Is the hon. Gentleman aware that a number of neighbouring communities, including the hard-hit town of Kidwelly, will be seriously affected by the closure and that there is no alternative work in the area, which is scheduled under the Local Employment Act? Will his Department at least treat this matter as one of urgency?

Mr. Kirk: We are treating it very seriously. The employment position in the area has improved over the last few months and we hope that it will be possible to provide alternative employment for these people.

Mr. Griffiths: On a point of order, Mr. Speaker. Owing to the importance of this matter to the County of Carmarthen and my constituency, and in view of the unsatisfactory nature of the reply, I beg to give notice that I shall seek to raise this matter on the Adjournment at the earliest opportunity.

Oral Answers to Questions — SCOTLAND

Probation Service (Negotiating Body)

Mr. Wolrige-Gordon: asked the Secretary of State for Scotland whether he will now set up a single negotiating body for the probation service; and if he will make a statement.

The Under-Secretary of State for Scotland (Lady Tweedsmuir): My right hon. Friends the Home Secretary and the Secretary of State hope very soon to begin discussions with the interested parties about the Morison Committee's recommendation that there should be a single negotiating body for the probation service in Great Britain.

Mr. Wolrige-Gordon: Is my hon. Friend aware that the Secretary of State, in reply to Questions earlier this year, said that consultations would be held as soon as a settlement of salaries for Scottish probation officers had been achieved? This settlement was reached and this is a matter of considerable urgency for the probation service. Will she conclude the negotiations as quickly as possible?

Lady Tweedsmuir: Yes, Sir. But the newly agreed salaries will not come

into operation altogether until the end of 1964, and therefore this temporary delay will not affect anyone.

Oral Answers to Questions — RAILWAYS

Proposed Closures

Mr. Hector Hughes: asked the Minister of Transport if he will state the procedure adopted when objections are lodged to railway closures under the Beeching plan; in particular, who hears and determines the objection; whether the objectors are allowed to be present in person and/or to be represented by solicitors or counsel; and whether they may adduce written and oral evidence, cross-examine, and address the tribunal.

The Parliamentary Secretary to the Ministry of Transport (Vice-Admiral John Hughes Hallett): Section 56 of the Transport Act, 1962, provides that, when a passenger closure is proposed, users may lodge objections with the appropriate area transport users consultative committee. The committee is required to consider the objections and report to my right hon. Friend on the hardship it considers will be caused by the proposed closure. In the light of its report and of any other relevant factors my right hon. Friend decides whether the closure should take place. Objectors can submit written evidence and can attend and speak at any meeting held by the committee to hear representations. They can, if they wish, be professionally represented at such meetings, which must be held in public. In general, the committee determines its own procedure but I understand that it allows objectors and their representatives reasonable latitude in the manner in which they present their case. This includes making statements and asking questions relevant to the matters within the scope of the committee's functions.

Mr. Hughes: Does not the hon. and gallant Gentleman realise that this is not a matter to be treated with levity and that these closures deprive hundreds of Scottish citizens of long-standing and cherished business and social contacts and ought not to be made without there being the proper opportunity to have them considered judicially—presenting the evidence and having the opportunity to cross-examine witnesses—and generally


treating the matter as a serious social problem? Will he take steps to see that justice is done by readjusting the present procedure?

Vice-Admiral Hughes Hallett: I can assure the hon. and learned Member that there is no disposition whatever to treat this matter with levity, I also point out that, until the Transport Act, 1962, users had no means of objecting to any rail closure, whereas the Government then gave them for the first time a statutory right to lodge objections to passenger rail closures. We are quite satisfied that these committees are properly conducted.

Mr. P. Noel-Baker: Will the hon. and gallant Gentleman give instructions for these consultative committees to be given professional assistance and for a full transcript of their proceedings to be made available? Is it not quite wrong that I should not be able to have a verbatim record of what passes in the objections made by many hundreds of my constituents about the closure of railway services to which they attach great importance?

Vice-Admiral Hughes Hallett: That is a slightly different matter from the Question, but I will convey the right hon. Gentleman's suggestion to my right hon. Friend.

Sir C. Osborne: Why cannot these committees be given the most important bit of information which they require? The most relevant question is how much money a line is losing. This the committees are not allowed to know. Why cannot we know how much is being lost and how much would have to be made up for a line to be kept open?

Vice-Admiral Hughes Hallett: I do not agree with my hon. Friend. Under the Act the committees are concerned with reporting to the Minister on hardship and on proposals to alleviate it. Hardship is normally shown by the evidence of the objectors. Other questions are considered by my right hon. Friend at the same time as he considers a committee's report on hardship.

Mr. Hughes: In view of the very great importance of this matter, I give notice that I shall raise it on the Adjournment at the earliest possible opportunity.

ADEN (INCIDENT)

Mr. Mayhew: (by Private Notice) asked the Secretary of State for the Colonies if he will make a statement about the bomb outrage at Aden Airport yesterday.

The Under-Secretary of State for Commonwealth Relations and for the Colonies (Mr. Nigel Fisher): This incident occurred yesterday morning at Aden Airport, when the High Commissioner and some Ministers and officials were about to leave for constitutional talks in London.
A hand grenade exploded outside the airport building among the departing passengers and people seeing them off. The assailant has not been discovered.
I regret to say that an Indian lady was killed and 43 people were wounded. Among those seriously injured were the Ruler of the Fadhli State and two British administrative officers. I am glad to say that the High Commissioner escaped with a slight hand injury.
The House will, I am sure, wish to express its horror and indignation at this outrage. Hon. Members will also wish to join me in expressing our sympathy to those who have suffered injury or bereavement.
The Supreme Council of the Federation of South Arabia has since declared a state of emergency throughout the Federation and has ordered a number of detentions and deportations in the interests of public security. I have asked the High Commissioner to keep me closely informed of developments.

Mr. Mayhew: Is the hon. Gentleman aware that the sympathy which he has expressed is shared on both sides of the House and that even those who have some reservations about the Government's policy in this area will not expect them to be diverted from the course which they think right by loathsome acts of violence of this kind? However, will he give an assurance that he will not allow this incident, serious as it is, to prevent further progress, which is already seriously delayed, towards a broader franchise in this area?

Mr. Fisher: The hon. Member is referring to the constitutional talks


which we were to have had this week. I am a little uncertain about their immediate future, because some of the Ministers who were to attend them are already in London, having left before the incident, while other delegates, including the High Commissioner himself, are still in Aden, and some of them in the circumstances will no doubt wish to remain there. Therefore, I think that it is clear that the talks cannot begin this week, as we had intended. I am in touch with my right hon. Friend and the High Commissioner and it may be that the talks will have to be postponed for a little while. If so, I would hope that it would not be for very long.

Mr. W. Yates: Will the Under-secretary have a discussion with the Yemeni Government, which Her Majesty's Government have now recognised, concerning the future of South West Arabia, or are the Government now considering a Greater Yemen and a different policy?

Mr. Fisher: There is no different policy. The talks which we were to have had in London this week were concerned merely with constitutional advance and the constitutional future of Aden itself.

Mr. Grimond: While sympathising with the victims of this outrage, may I ask the Under-Secretary to make it clear whether this was an isolated attack; or has there been further trouble in other parts of the Protectorate?

Mr. Fisher: No, Sir. There has been no other trouble of this sort. Of course, as the right hon. Gentleman knows, there always tend to be border incidents in the Protectorate—these are a time-honoured pursuit in that part of the world—on the undemarcated Yemen frontier with the Federation. But they are quite separate from an incident of this sort, which has not happened before. We hope that it is an isolated incident and not a prelude to other violence of this type.

Mr. Oram: As a member of a very recent delegation to Aden, may I join in the expressions of sympathy to the victims of this explosion? Some were our very kindly hosts, to whom we

were very grateful. May I urge the hon. Gentleman and his right hon. Friend to learn the right lessons from this and similar events, which is that there is a need to get the processes of democracy in Aden working very quickly, which means early elections on a widely acceptable franchise? Is it not only by the processes of democracy that violations of law and order of this kind can be forestalled?

Mr. Fisher: The hon. Gentleman put that question to me at Question Time yesterday and I can only give him the answer I gave then, which is that the new franchise proposals are under consideration in Aden and will no doubt be discussed when we meet the Ministers from Aden. We have no intention of postponing the elections, which are due to be held there by April of next year.

Mr. G. M. Thomson: Can the hon. Gentleman give the House any information about the reports of arrests of people in Aden, including many leaders of the People's Socialist Party? Is he aware of the concern that, in the legitimate anxiety following this event, there should not be any indiscriminate arrests of political leaders, thus aggravating the political situation?

Mr. Fisher: Yes, Sir. Twenty-nine people have been detained by the Federal authorities. I do not yet know the names of those who have been detained, or the details of any charges which may be made. I have sought, and am awaiting, further information from our High Commissioner.

Mr. Mayhew: Does that answer imply that the Minister will deny the protest made by the Aden T.U.C. that 200 people, including leaders of the Aden T.U.C. have been arrested?

Mr. Fisher: I do not know anything about those figures. The figures that I have given are of people arrested, and are the latest that I have from the High Commissioner. It may be that the hon. Gentleman is thinking of deportations rather than arrests, and in that context I must tell him that according to my latest report 142 Yemenis have been deported over the border to their own country.

HON. MEMBER FOR DUDLEY (SUPPLEMENTARY QUESTION)

Sir G. Nabarro: On a point of order, Mr. Speaker. Yesterday, I raised a point of order concerning the choice of words employed by the hon. Member for Dudley (Mr. Wigg)—to whom I have addressed a note saying that I intended to repeat the point of order to you today—in a further supplementary question to my right hon. Friend the Prime Minister on public opinion polls.
Your reply to my point of order yesterday, raised with you twice, was that you did not yourself hear the words used by the hon. Member for Dudley. I said during the course of a supplementary question that, so far as I was aware, everybody else on my side of the House heard them, and they have been faithfully reported in the Official Report. If I may, I wish to repeat to you now the words used by the hon. Member for Dudley. He said:
Will the Prime Minister also take into account the amount of pints which he bought the electors during the course of the campaign?"—[Official Report, 10th December, 1963, Vol. 686, c. 213.]

Mr. Wigg: Hear, hear.

Sir G. Nabarro: The purpose of my point of order is to inquire whether it is within the rules of order of this House for any hon. Member to impute to another an electoral impropriety involving corrupt practice and a contravention of the Representation of the People Act, 1949. Mr. Speaker, you did not hear the words yesterday, but they have now been printed. Though you did not hear them, I wrote to you this morning and asked you if you would read them, and I hope now that you will be able to rule that they are out of order and should be withdrawn.

Mr. Speaker: I regret that it was not possible from this Chair at that moment to hear the words used with sufficient precision to rule. I know that there have been times when my predecessors have diplomatically not heard things. It was not an instance of that kind. It was physically impossible to hear the words. Had I heard them at the time, it would have been my duty to direct that they should be withdrawn. At this moment of time I have no power so to direct.

Mr. Wigg: Further to that point of order, Mr. Speaker. I wish, respectfully, to submit that I used the words, but I did not say pints of what. It could have been pints of—

Mr. Speaker: I do not wish to appear to fail to hear the hon. Member again, but I am afraid that I missed a word. For some curious reason it is well known that the position from which the hon. Member is speaking is the worst acoustically from the point of view of the Chair.

Mr. Wigg: I used the words referred to by the hon. Member for Kidderminster (Sri G. Nabarro). I have not denied it, but I did not say pints of what. It could have been pints of water, or pints of milk but, fortunately, in the Daily Telegraph of 30th October, there is a photograph of the Prime Minister drinking with two gentlemen, one of whom, Mr. Copeland, said:
The Prime Minister bought me a pint.
Mr. Copeland is seen drinking a pint of beer, and the Prime Minister is drinking whisky. The report quotes Mr. Copeland as saying that he will vote for the Prime Minister.
That was not the only incident. On 31st October, the Daily Mirror carried the following article, which it had extracted from the Daily Telegraph:
The procession weaved its way into the Amulree Hotel, where Colonel and Mrs. Archie Haddow had assembled the local gamekeepers and shepherds. They had all been given a drink. But they were too shy to ask the Prime Minister questions. He quickly sensed this and made a brief speech instead. 'That was just right. It was lovely,' said Mrs. Haddow.
Cassandra added:
It wasn't lovely, it was ruddy marvellous.
I could weary the House with other examples, but I want to make two submissions. The first involves reading an extract from the Daily Telegraph, a responsible newspaper for which I have the greatest respect. Referring to this incident, it said:
 'Treating' is a corrupt practice under Section 100 of the Representation of the People Act, 1949. As such it could be the basis of a petition to unseat a successful candidate.
The essence of the offence is that drink must have been given 'for the purpose of corruptly influencing' someone to vote or


refrain from voting, or 'on account of' someone being about to vote or refrain from voting. But it would have to be proved that the drink had been provided 'corruptly'.
My submission is that there is no doubt whatever that the Prime Minister and his friends, in accordance with the feudal practices extant in Scotland, went about buying pints left, right and centre while they drank whisky themselves. I did not allege then, nor do I allege now, that this was a corrupt practice. This is just the way that the Prime Minister behaves.
May I now turn to the hon. Member for Kidderminster?

Mr. Speaker: I am afraid not. Nothing about him arises on the point of order. If the hon. Member is making a serious point of order, I shall of course, hear him, but I cannot have a discussion on the point that has been raised.

Mr. Wigg: Mr. Speaker, this constituted a personal attack of the most vicious and unfair kind. I have no complaint about that. I came into the House at two o'clock and received a note, but the hon. Member for Kidderminster had alerted the whole of the Press and the Gallery. Look at the Gallery. Every Press man in the House is there.

Mr. Speaker: I should like to express my gratitude to the hon. Member for making himself audible to me now, so conveniently. I should much dislike to have missed it.
Being conscious of my duty to the House, I must now deal with this matter a little more formally. The position is that in the context in which the words were uttered I should have been bound yesterday, had I been able to hear them, to ask the hon. Member to withdraw them, which no doubt, would have given him an opportunity of explaining, but I cannot allow discussion on this to continue. I have no power to require their withdrawal now. The time is past and in the interests of the House we cannot continue this discussion.

Mr. Wigg: On a point of order. With all respect, Mr. Speaker, I wish to make two things quite clear. Had you asked me to withdraw this remark yesterday or

today I should have refused, and I should have put down a Motion of censure upon you for asking me.

Mr. Speaker: That would not have deterred me from doing what I thought to be my duty. What I conceive to be my duty now is to put an end to this, and to proceed. I have a statement to make to the House.

Mr. Wigg: On a point of order.

Lieut.-Colonel Sir Walter Bromley-Davenport: Sit down!

Mr. Wigg: I did not start this. The hon. Member for Kidderminster started it, but I am going to finish it.
The hon. Member prefaced his remarks today by saying that he gave me notice. Therefore, I surely have a right to draw the attention of my colleagues and the House to the amount of notice given to me. I received notice at two o'clock. The letter was written to me in personal terms, beginning "My Dear George". That term is reserved for my friends, and those whom I respect—

Mr. Speaker: Order. I must warn the hon. Member that despite this ritual I have determined that we should go on.

HOUSE OF COMMONS ACCOMMODATION (COMMITTEE)

Mr. Speaker: I have a statement to make to the House.
The House should know that I propose to appoint a Committee to advise me on the short-term allocation of the additional accommodation which the Government have made available for Parliamentary purposes on the second, third and fourth floors of No. 1 Bridge Street until the demolition of those premises begins.
The following hon. Members have been good enough to consent to serve on the Committee: Sir James Duncan, as Chairman, Mr. Paul Channon, Mr. Charles Pannell and Mr. Roderic Bowen.
It is probably wise to make it clear at once that I understand that it will not be possible to regard the allocation of accommodation now as conferring any title to enjoy other accommodation in the future.

BILLS PRESENTED

ABOLITION OF RESALE PRICE MAINTENANCE

Bill to repeal section 25 of the Restrictive Trade Practices Act 1956, and to make it unlawful for supplies of goods to be withheld from retailers cutting suggested prices of such and similar goods, presented by Mr. John Stonehouse; supported by Mr. Oram, Mrs. Harriet Slater, Mr. Anthony Crosland, Dr. J. Dickson Mabon, Mr. Sydney Irving, Mr. W. T. Williams, Mr. Francis Noel-Baker, Mr. Robert Edwards, Mr. Anthony Wedgwood Benn, Mr. Roy Jenkins, and Mr. Arthur Holt; read the first time; to be read a Second time upon Friday, 17th January, and to be printed. [Bill 25.]

TRADING STAMPS

Bill to make provision with respect to trading stamps, including provision for regulating the issue, use and redemption of trading stamps; to provide for regulating the business of issuing and redeeming trading stamps; and for purposes connected with the matters aforesaid, presented by Mr. John Osborn; supported by Sir Cyril Osborne, Sir Charles Taylor, Mr. Wilfred Proud foot, Mr. Charles Longbottom, Mr. Antony Buck, Mr. John Howard, Mr. Geoffrey Hirst, Mr. John Stonehouse, Mr. Anthony Wedgwood Benn, Mr. Francis Noel-Baker, and Mr. Arthur Holt; read the First time; to be read a Second time upon Friday, 31st January, and to be printed. [Bill 26.]

REDUNDANT WORKERS (SEVERANCE PAY)

Bill to provide minimum terms for severance pay for workers dismissed through redundancy or other causes beyond their control, presented by Mr. Julius Silverman; supported by Mr. John Diamond, Mr. Herbert Butler. Mr. John Rankin, Mr. Malcolm MacMillan, Mr. Parkin, Mr. Stephen Swingler. Mr. John Stonehouse, and Mr. Ron Ledger; read the First time; to be read a Second time upon Friday, 14th February, and to be printed. [Bill 27.]

BETTING, GAMING AND LOTTERIES (AMUSEMENTS WITH PRIZES)

Bill to amend the Betting, Gaming and Lotteries Act 1963 with respect to the provision of amusements with prizes, presented by Lord John Hope; supported by Mr. Anthony Buck and Sir Lionel Heald; read the First time; to be read a Second time upon Friday, 28th February, and to be printed. [Bill 28.]

LOCAL GOVERNMENT (PECUNIARY INTERESTS)

Bill to amend sections 76 and 123 of the Local Government Act 1933, and sections 52 and 90 of the London Government Act, 1939, presented by Sir Hubert Ashton; supported by Mr. John Arbuthnot, Mr. Bourne-Arton, Mr. Godfrey Lagden, Sir Richard Nugent, Sir Hendrie Oakshott, Mr. Pargiter, Mr. Parkin, Sir Kenneth Pickthorn, Mr. John M. Temple, and Mr. Arthur Skeffington; read the First time; to be read a Second time upon Friday, 13th March, and to be printed. [Bill 29.]

IMPORTATION OF RARE ANIMALS

Bill to restrict the importation of rare animals, presented by Miss Harvie Anderson; supported by Mr. David James, Mr. Ronald Russell, Mr. James H. Hoy, Mr. Archie Manuel, Mr. Leavey, Mr. Stephen Swingler, Mr. Willis, and Mr. Marcus Kimball; read the First time; to be read a Second time upon Friday, l0th April, and to be printed. [Bill 30.]

MERCHANT SHIPPING

Bill to enable effect to be given to an International Convention for the Safety of Life at Sea signed in London on 17th June 1960; to amend section 271 of the Merchant Shipping Act 1894; and for purposes connected therewith, presented by Mr. David Webster; supported by Sir Knox Cunningham, Captain Walter Elliot, Mr. Mellish, Sir David Robertson, Dr. Horace King, Mr. Burden, Mr. Farey-Jones, Mr. A. J. Irvine, Sir Kenneth Thompson, and Mr. Wilkins; read the First time; to be read a Second time upon Friday, 13th March, and to be printed. [Bill 31.]

WIDOWS' PENSIONS

Bill to increase the ten shilling pensions payable to certain widows; and to amend the law regarding earnings of widows in receipt of pensions, presented by Mr. Frank McLeavy; supported by Mr. Marcus Lipton, Mrs. Braddock, Mr. George Jeger, Miss Margaret Herbison, Dr. Jeremy Bray, Mrs. Eirene White, Mr. George Craddock, Mr. Archie Manuel, Mr. Hayman, and Mr. H. Hynd; read the First time; to be read a Second time upon Friday, 14th February, and to be printed. [Bill 32.]

RIDING ESTABLISHMENTS

Bill to regulate the keeping of riding establishments; and for purposes connected therewith, presented by Sir Joceyln Lucas; supported by Mr. John Morrison, Sir John Gilmour, Mr. Anthony Greenwood, Mr. Marcus Kimball, Lieut.-Colonel Sir Walter Bromley-Davenport, Mr. Eric Lubbock, Sir Thomas Moore, Mr. Leavey, Mr. Arthur Moyle, Mr. Hayman, and Mr. Burden; read the First time; to be read a Second time upon Friday, 14th February, and to be printed. [Bill 33.]

ADOPTION

Bill to provide for effect to be given to certain adoption orders made outside Great Britain; to facilitate the proof of adoption orders in different parts of the United Kingdom; and for connected purposes, presented by Mr. George Forrest; supported by Lord Robert Grosvenor; Mr. Stratton Mills, Mrs. Braddock, Mr. George Thomas, Mr. John E. Maginnis, Captain Orr, Mr. Arthur Holt, and Mr. Stanley McMaster; read the First time; to be read a Second time upon Friday, 28th February, and to be printed. [Bill 34.]

CRIMINAL PROCEDURE (RIGHT OF REPLY)

Bill to amend the law relating to the prosecution's right of reply at trials on indictment, presented by Mr. John Hall; supported by Mr. Ronald Bell, Mr. F. M. Bennett, Sir George Benson, Sir Beresford Craddock, Mr. Charles Doughty, Mr. Edward Gardner, Mr. Hooson, Mr. Elwyn Jones, Mr. Niall MacDermot, Mr. E. L. Mallalieu, and Mr. Norman Miscampbell; read the First time; to be read a Second time upon Friday, 31st January, and to be printed. [Bill 35.]

REPRESENTATION OF THE PEOPLE ACT 1949 (AMENDMENT)

Bill to amend subsections (1)(e) and (3)(a) of section 12 of the Representation of the People Act 1949 so as to enable persons temporarily absent from their qualifying address to vote as absent voters; to provide penalties for false declaration; and for purposes connected therewith, presented by Mr. Rees-Davies; supported by Mr. Iain Macleod, Sir Donald Kaberry, Dame Patricia Hornsby-Smith, Mr. Eric Lubbock, Mr. Hayman, Sir Leslie Thomas, Mr. William Clark, Mr. F. M. Bennett, and Mr. Harold Gurden; read the First time; to be read a Second time upon Friday, 10th April, and to be printed. [Bill 36.]

TRADE UNION (AMALGAMATIONS, ETC.)

Bill to amend the law relating to the amalgamation of trade unions, the transfer of engagements from one trade union to another, and the alteration of the name of a trade union, presented by Mr. Colin Turner; supported by Mr. Kenneth Lewis, Mr. Dudley Smith, Mr. David James, and Mr. John Page; read the First time; to be read a Second time upon Friday, 31st January, and to be printed. [Bill 37.]

PROTECTION OF TENANTS OF FURNISHED ACCOMMODATION

Bill to provide for the protection of the tenants of furnished accommodation who have applied for or received a decision from a rent tribunal, presented by Mr. George Thomas; supported by Mr. Edward Short, Mr. Cledwyn Hughes, Mr. J. Idwal Jones, Mr. T. W. Jones, Mr. John Morris, Mr. Merlyn Rees, Mr. W. T. Williams, Mr. Norman Pentland, Mr. Eric Lubbock, Mr. W. W. Hamilton, and Mr. Stan Awbery; read the First time; to be read a Second time upon Friday, 13th March, and to be printed. [Bill 38.]

LOCAL GOVERNMENT (QUALIFICATIONS FOR OFFICE)

Bill to amend the law relating to the qualification by residence for election and holding office as a member of a local authority in England and Wales, presented by Major Sir Frank Markham; supported by Mr. Arthur Tiley, Dame Patricia Hornsby-Smith, and Mr. Denzil Freeth; read the First time; to be read a Second time upon Friday, 10th April, and to be printed. [Bill 39.]

PROTECTION OF BIRDS ACT 1954 (AMENDMENT)

Bill to provide that section 10 of the Protection of Birds Act 1954 shall no longer extend to Northern Ireland except in so far as it authorises the Minister of Home Affairs for Northern Ireland to grant licences for the importation of wild birds or their nests or eggs, presented by Mr. John E. Maginnis; supported by Sir Gerald Wills, Sir Knox Cunningham, Mr. Stratton Mills, Lord Robert Grosvenor, Mr. George Thomas, Mr. George Forrest, Mr. Stanley McMaster, Mr. Prior, and Captain Orr; read the First time; to be read a Second time upon Friday, 28th February, and to be printed. [Bill 40.]

PHARMACY AND POISONS (AMENDMENT)

Bill to make provision for increase of the fees payable by authorised sellers of poisons in connection with the registration of their premises, and for that purpose to amend the Pharmacy and Poisons Act, 1933, presented by Sir Hugh Linstead.; supported by Mr. Alan Brown; read the First time; to be read a Second time upon Friday, 31st January, and to be printed. [Bill 41.]

SCRAP METAL DEALERS

Bill to amend the law relating to dealers in scrap metal and similar goods, and to dealers in marine stores, and for purposes connected therewith, presented by Sir Donald Kaberry; supported by Mr. R. Gresham Cooke, Mr. Arthur Tiley, Dame Edith Pitt, Mr. Patrick Wall, Mr. John Biggs-Davison, Mr. Harold Steward, Mr. John Howard, Mr. F. M. Bennett, Mr. John Hollingworth, Mr. Farey-Jones,

and Mr. Wilfred Proudfoot; read the First time; to be read a Second time upon Friday, 17th January, and to be printed. [Bill 42.]

UNIVERSITIES AND COLLEGE ESTATES

Bill to amend the law relating to property held by or on behalf of universities and colleges, and for purposes connected therewith, presented by Sir Neill Cooper-Key; supported by Mr. J. Enoch Powell, Mrs. Eirene White, Sir Hamilton Kerr, and Mr. Charles Grey; read the first time; to be read a Second time upon Friday, 13th March, and to be printed. [Bill 43.]

NURSES

Bill to make further provision concerning the admission of persons to the roll of nurses maintained for England and Wales under section 2(1)(b) of the Nurses Act 1957 and that maintained for Scotland under section 3(1) of the Nurses (Scotland) Act, 1951, presented by Dame Patricia Hornsby-Smith; supported by Lord Balniel, Mr. Christopher Mayhew, Dame Edith Pitt, Mr. Clive Bossom, Mrs. Eveline Hill, Mrs. Braddock, Captain Walter Elliott, Mr. Colin Turner, Mr. Mellish, Mr. Gordon Matthews, and Mrs. Evelyn Emmett; read the First time; to be read a Second time upon Friday, 17th January, and to be printed. [Bill 44.]

BUSINESS OF THE HOUSE (SUPPLY)

Ordered,

That this day Business other than the Business of Supply may be taken before Ten o'clock.—[Mr. Hughes-Young.]

SUPPLY

[3RD ALLOTTED DAY]

Order for Committee read.

Motion made, and Question proposed, That Mr. Speaker do now leave the Chair.—[Mr. Pym.]

COMMITTEE OF PUBLIC ACCOUNTS (REPORTS)

3.58 p.m.

Mr. Douglas Houghton: I beg to move, to leave out from "That" to the end of the Question and to add instead thereof:
this House takes note of the First, Second and Third Reports from the Committee of Public Accounts in the last session of Parliament, and of the Special Report from the Committee of Public Accounts.
This is the annual outing of the Public Accounts Committee. On this day we emerge from the cloistered seclusion of a Committee Room upstairs and say something to the House and country of what we have been doing. The House has in its possession the formidable volume of evidence that we have taken during the last Session. Members of the Committee are occupied on this work for two afternoons a week from November to the end of May, and this volume is the product of our labours.
I open the debate in my capacity as Chairman of the Public Accounts Committee—a position that I have held only since last February, when I was very gratified and honoured to succeed my right hon. Friend the Member for Huyton (Mr. H. Wilson). Perhaps I may say a personal word here. After many years in and about Government Departments, and as one of the earliest members of the Royal Institute of Public Administration, I find this work very much to my taste, and fascinating withal.
But my term as Chairman may be a short one. It may be the shortest on record. My days may be numbered because, as the House knows, the Chairman of the Public Accounts Committee traditionally is a Member of the Opposition. After the General Election next year, I expect to be succeeded by a right hon. or hon. Gentleman from the benches opposite. This will be a great

disappointment to me, but—one never knows—it may have its compensations.
I speak in this debate, as my predecessors have done, in a kind of neutral posture, although from this Box, because I speak on behalf of the Committee as a whole, and I must not stray from the path of the discourse which it falls to me to make. We do not do our business in the Public Accounts Committee on party lines, as hon. Members know. Although the Government have a majority of members of the Committee, no one would ever notice it. There nave been only 64 Divisions in the Committee during the last 100 years; none in my short time, none, I believe, in the three years of my predecessor; and probably none in the eight years of the chairmanship of my hon. Friend the Member for Chesterfield (Sir G. Benson).
In nearly every debate on the Report of the Public Accounts Committee reference is made to its founder, Mr. Gladstone, because the Committee was set up on his instigation by Resolution of the House in 1861, which was a year after the last meeting of the National Debt Commissioners. The total of the budget when the Committee was set up was about £69 million which, I suppose, is the small change of public expenditure in a Budget of over £6,000 million. Little did Gladstone foresee that long before we marked the centenary of his death, public expenditure would be a hundred times greater than it was in his time.
This vast amount of public money being spent every year on the nation's business is voted by the House on detailed Estimates presented by Departments and the Treasury. It must satisfy the highest standards of public administration in these matters. The money must be properly spent and accounted for. The books, accounts, and all relevant documents are open to the inspection and audit of the Comptroller and Auditor General and his officers, and the House must be satisfied that in all this enormous apparatus of public affairs there is a clean bill of health.
We should acknowledge the work of the Comptroller and Auditor General and all his officers, without whose diligence, vigilance, zeal and efficiency the work of the Public Accounts Committee would be almost impossible. He is


a servant of this House. He can go about his business without fear or favour. He need not look over his shoulder, because he cannot be removed except by a vote of both Houses of Parliament, which puts him in a very strong position. The Comptroller and Auditor General is armed with the powers of inspection and investigation, and if he is obstructed or thwarted in the performance of his duty, he can report the matter to the Public Accounts Committee, and he would have the full support of the Committee and of the House in discharging his duties to his own satisfaction. He and his officers scrutinise and probe, and if anyone wants to know what they are doing and what they are looking for, the answer is "Trouble"; and some of the troubles which he has discovered in the course of his investigations are contained in his Report on the Appropriation Account.
Our duty, as a Public Accounts Committee, is to investigate the matters which he raises and to look into allegations or suggestions of waste, faults or weaknesses of administration. We have to be satisfied, as far as we can, that the country is getting value for money for all its expenditure. We are a committee of inspection or elected auditors, and the big question which overhangs the whole of our work is this: is the business of the Departments being conducted properly, with efficiency, and with due regard to economy in accordance with the decisions on policy, approved or authorised by this House, and with probity and integrity?
One feature of our public administration which we constantly boast about, I think rightly, is how free it all is from corruption and scandal. There can be few countries in the free world where there is so little of a sordid and unpalatable character to report to the Legislature on what has been happening in public Departments and administration. In expenditure, and, of course, on the corresponding revenue side, of these dimensions it would be impossible to carry out our business but for the incorruptibility of the Civil Service, the vigilance of accounting officers and the perceptive and penetrating eye of the Comptroller and Auditor General. Especially in view of my long connection with the Civil Service, perhaps I might

be permitted to take the opportunity of paying tribute to the hundreds of thousands of public servants of all grades whose accuracy, zeal and sense of duty enables the Public Accounts Committee to give public administration such a clean bill of health in its Report to the House today.
The anxieties of the Public Accounts Committee lie elsewhere, as our Report clearly shows. They can be classified in this way, in ascending order of importance, and put, if I may say so, quite crudely: first, the exploitation and abuse of compensation payments; secondly, the exploitation and abuse of subsidies; thirdly, the obvious problems of private doctoring at public expense; and fourthly, how to get full value for money and the best terms possible for the Government as a customer, as a buyer of goods and services, on a vast scale, the biggest buyer in the country.
As an example of the first, I draw the attention of the House to paragraphs 56 to 59 of our Report, which relates to the compensation paid under the reorganisation scheme of the cotton industry. The House will see that certain conditions were laid down for the payment of compensation for firms going out of business. This scheme was designed to reduce the size of the cotton industry on both the spinning and the weaving sides in order to make it a more viable industry with the decline in the export trade and the inroads into the home market of tax and quota-free imports from the Commonwealth.
The scheme was introduced with a view to encouraging people to get out of business and so contract and concentrate the industry. The House will see in paragraph 57 that in the case of a company registered under the Companies Act, if one firm in a group wanted to go out of business they all had to go out if they were to receive compensation at premium rates. That was to avoid a company or group of companies contracting themselves, getting compensation for concentration, and probably doing better out of the smaller unit than they did before. What the scheme did not do was to require businesses controlled by principals themselves to go out of the cotton industry so that a firm which was controlled by one big share-


holder could go out of the business and get compensation at premium rates, but the principal in that business could either acquire another one or remain in another business and carry on as before, probably getting the benefit from the concentration of his own activities with compensation for a reduction in the scope of his firm, already threatened to some extent by a decline in business.
We are bound to have in all these matters rules and conditions about payment of compensation. If they are too rigid the complaint is that they leave no room, no flexibility, no opportunity, for meeting special cases. If they are not rigid enough we get the sort of incident to which I have referred. Although we were assured by the Board of Trade and the Cotton Board, who came before us, that they had carried out their duty in strict accordance with the Act and the regulations, nevertheless the Committee reports, in paragraph 59, that we were not convinced that it was necessary or desirable for so complete a distinction to have been made between participating companies and their controlling shareholders or directors. There is no suggestion that compensation was improperly paid. I am drawing the attention of the House to the problems of administration when that room for manoeuvre is provided in the conditions laid down in the Regulations.
The next main head of my four points is illustrated by agricultural subsidies. The Report, in paragraphs 85 onwards, deals with one aspect of a wide range of agricultural support subsidies. The House does not need reminding that the Committee does not go into questions of policy. We are not concerned with whether particular policies are good or bad. They have been decided by this House and it is not for the Public Accounts Committee to question them. Our job is to draw attention to the problems of administration of policy. There is no doubt that agricultural support subsidies add up to a very large slice of public expenditure. The Estimates for the current year, 1963–64, put them at £364 million, which is a large sum of money by any reckoning.
We examined during the course of our work the operation of the lime subsidy, which costs the country £9½ million a

year. Farmers are encouraged to spread lime on their land and they are given a subsidy of 60 per cent. of the cost of the lime and the cost of spreading. I need scarcely say that there are opportunities for unscrupulous people to buy lime, to get it under the subsidy scheme and not use it for the purpose for which it was intended.
Another matter was that bonus payments under the tuberculosis attested herds scheme, which costs the country £3million a year. A question which arose there was whether, in the farmer's return of the numbers of his attested herd, there should be any check on the accuracy of the numbers. Would it be enough to ring him up on the telephone and ask what the numbers were and take his word for it? It is not easy to decide in matters of this kind whether it would cost more to go and have a look or to keep officers at home and take the risk of this subsidy being abused. Special checks were imposed at the instigation of the Committee, but were found to be quite costly in comparison with the amount of loss through improperly returned numbers.
There are other aspects of the support subsidies which, of course, no one can control, which are at the mercy of the market and of nature. A farmer friend of mine a year ago said, "We have the biggest harvest ever. In 50 years of farming I do not remember anything as bountiful as this, but, by goodness, it is going to cost the British taxpayer a lot of money because the price fell and the gap between the market price and the support price involved the Exchequer in very large payments." It will be noticed that in 1962–63 the wheat and rye price guarantee had risen from £16 million to £34 million. That is the size of this problem.
A particular matter referred to in paragraph 85 of our Report had to do with the certification of live fatstock. The House will see that in a particular season when the price of fatstock fell, farmers decided to sell while prices were low so as to draw the fatstock subsidy which was the difference between the price at which they sold and the support price. There was no obligation on the farmer selling his fatstock to send them immediately to slaughter. He could


sell them to another farmer. Then the vendor farmer could buy some more and, when the price rose, he could sell again and reap the benefit of the higher price. It is estimated that that cost the country about £3 million. It was very difficult to estimate.
All kinds of questions have arisen on safeguards. At one hearing we had witnesses come before us with a whole assortment of marking instruments for clipping the ears, dyes and other things which could mark a beast which had been sold, upon which the subsidy was being paid, and upon which a rule might be made that it must be slaughtered within 28 days. But we were told that no suitable identification mark, no date stamp, could be put on a beast which would last for even 28 days. One can clip the ears of calves, apparently, but one cannot clip the ears of grown animals.
We comment on that in paragraph 90 and we express the opinion that the measures so far taken are not sufficient to protect the Exchequer from exploitation by the device of premature presentation of fatstock for certification. We consider that further action should be taken next time to prevent a recurrence of the results experienced in 1961. We understand that the Minister is considering alternative ways of dealing with this problem.
Under the third heading, the obvious problems of private doctoring at public expense, or in socialised medicine, as the Americans call it, I come to the very troublesome and delicate matter of the cost of pharmaceutical services under the National Health Service. This has appeared in the Reports of the Public Accounts Committee for some years. I must preface what I am about to say by emphasising that a doctor has the right, under the Health Service, to use his own clinical judgment and his own responsibility to prescribe for each patient what he thinks best.
There is no question about it. The doctor can choose the treatment he gives to his patient and there is no one to question his clinical judgment in that regard. The doctors insisted upon that. The public has insisted on it, too. Members of the public want to feel that when they see their doctor he is not crabbed and confined by a voluminous instruc-

tion from the Ministry of Health that he cannot do this or that, and must not prescribe this or that.
But certain consequences follow from this inviolable condition attaching to the doctor's place in the Health Service. Clinical freedom must be paid for. It is being paid for and when we hear of doctors being carpeted for over-prescribing the charge is generally one of extravagance and not relating to clinical judgment. There could be extravagance in the frequency or quantity of the prescriptions. But the quality of the prescription is within the judgment and responsibility of the doctor.
The main anxieties of the Committee in this sphere fell under two heads. First, the cost of prescriptions. The House will see in paragraph 34 of our Report that although the number of prescriptions fell from 241 million in 1960 to 226 million in 1961, their total cost increased from £88 million to £92 million and the average cost per prescription increased by 12 per cent. from 7s. 3¾d. to 8s. 2¼d. Sample analyses made by this Departments indicated that in 1961 proprietary preparations accounted for £54 million of the total net ingredient cost of £61 million.
The cost of prescriptions has risen by 32 per cent. in the last five years and the Estimate for 1963–64 puts the total cost at over £100 million. Of course, when looking at the cost we have to subtract from the £100 million the amount paid by the patient in prescription charges. But in prescriptions averaging 8s. 2¼d. in cost the patient pays only 2s. Everything beyond that is a charge on the National Health Service.
Another feature about prescriptions which, I think, baffles almost everyone is the variation between doctor and doctor and area and area. Hon. Members will see a reference to this in paragraph 36. Nobody seems to know why prescriptions per patient in the doctor's list in some areas cost so much more than in other areas. Why is it? Is it that some areas have more people suffering from particular kinds of illness requiring particularly expensive drugs? Nobody seems to know. But the Ministry is carrying out a number of studies in an attempt to explain the wide difference in cost between area


and area. As the Report says, the results so far have proved disappointing. I think that that is all I need say about the cost of prescriptions.
Our second anxiety is the really touchy one. It is the prescribing of non-standard proprietary drugs, which we refer to in paragraph 39. It will be convenient for me to link with that subject the voluntary price regulation and related matters referred to in paragraphs 42 to 45 and advertising and sales promotion, in paragraph 49. Here I come to the most unhappy "cold war" in the Health Service. I do not think that that is too strong a term to apply to the condition of things in this respect and I will emphasise that in a few moments.
Here the Ministry representative is the guardian of the public interest. The pharmaceutical industry represents its own interests, the interests of research and the interest of high-quality drugs, and, I am glad to say, in a most enlightened form of self-interest, tries to do this job properly. I shall not say anything about the industry, but it is most distressing to the Committee, and certainly to me, to find the cause for such strong feelings on both sides. This controversy cannot be pushed aside or bought off. It has to be tackled.
I have already explained that it is inherent in the Health Service that the general practitioner service and the freedom of the doctor enable a medical practitioner to prescribe proprietary drugs if, in his judgment, they are appropriate for his patient, and it comes down to the general practitioner service. Obviously, there are greater facilities for the control of the use of drugs in hospitals. I have to emphasise that the National Health Service is the biggest customer of the pharmaceutical industry. There is a big and almost insatiable market for drugs of all kinds, and, if the pace and tension of life quickens, we may become even more prone to bodily and mental ills for which the medicine bottle and the tablet offer relief. Mr. Aneurin Bevan once referred to the cascade of medicine being poured down the throats of the British people every day, at the rate of 226 million prescriptions a year at 8s. 2¼d. a time, on average, for which a patient pays a prescription charge of 2s.
It is difficult to say where the balance may lie in economies as between a state of affairs where the patient pays something and where the patient may pay nothing. There is a difference of opinion about how far the prescription charge tends to influence the quantity of the prescription given by the doctor in medication. I do not pretend to know the truth about that and I do not suppose that anyone does know. Obviously, it is a temptation to the doctor to prescribe in quantity where he feels that the recurrence of the prescription charge may bear hardly on his patient. The issue is not between the use of one drug rather than another, but between the use of proprietary or branded medicines and an unbranded equivalent. That is referred to in paragraph 39 of the Report.
It is a difficult question, and one on which it is difficult for a layman to speak with any authority. I expect that hon. Members have, during the last days, received copies of the pamphlet, "How equivalent is an 'equivalent'?" We have to be guided by experts in these matters. I cannot pretend to Judge. Obviously, it is a matter for considerable discussion about whether what is called an equivalent is, in fact, an equivalent. When the best advice is given to the Ministry that certain proprietary preparations have an unbranded equivalent at considerably less cost, the Ministry would be failing in its duty if it did not give consideration to the widest use of the unbranded equivalent at the cheaper price.
The other question is: what price shall the Health Service pay for proprietary drugs for which there is no unbranded equivalent? It must be borne in mind that the Ministry of Health is not a bulk buyer of drugs. It does not buy them in quantity and distribute them to the chemists or to the doctors. The doctor prescribes. The chemist makes up the prescription. He buys through the normal channels, but at prices which have been negotiated in many cases between the Ministry and the manufacturers. Therefore, they are charged at an agreed price.
That opens up difficult questions of negotiation of price. The Committee refers, in paragraph 41, to an attempt to get agreement on price under a voluntary price regulation scheme. The actual purchaser is the doctor on behalf of the Health Service. He starts the ball rolling.


There is no one purchaser. There are thousands of purchasers. The doctor gives the order, which is the prescription. The patient pays the prescription charge for it. The Health Service pays the balance. It follows that, short of the doctors being given instructions, they are free to act as then clinical judgment dictates.
That puts the drug industry in a very strong position. Its customers are the doctors. The Ministry at best can hope to control the price which is paid for many drugs only through a voluntary price regulation scheme. There is a formula for it. It is to be found in paragraph 4 of our Report. This leaves the industry free to influence the doctors, and we refer in paragraphs 49 and 55 to advertising and sales promotion.
The drug industry is engaged in an extensive system of sales promotion amongst the doctors. They are the people to get at because, after all, they are the people who give the orders. They write out the prescription. If the doctor can be got on the industry's side, he is the man to go for. The industry does not bother about the patient—he does not know and he cannot tell the doctor what to prescribe. So it is the doctor who may be susceptible to sales promotion activities by the various branches of the pharmaceutical industry.
We must not be too harsh in this matter all at once. After all, doctors are entitled to know about new drugs and about variations on old drugs. They are entitled to know what is going on in medicine and drugs. They are entitled to hear some clinical reports on what drugs do. Doctors are busy people. It is sometimes easier to think of the proprietary brand instead of writing out a prescription according to the formulary of an unbranded equivalent.
In these days do not let us disguise the fact that there are many patients who tell their doctors what will be good for them. Many doctors feel that at their own peril they will decline to treat a patient in accordance with his own prescription. Such a patient not only prescribes the medicine he shall have. He diagnoses himself before he goes in. Doctors, in their numerous

activities, probably think that faith healing is probably as good as any other and, if it is what the patient thinks will do him good, let him have it, unless the doctor has reason to think that there is anything more seriously wrong.

Mr. Joseph Hiley: Are medicines for prescription advertised? In other words, does the patient generally know what these remedies are?

Mr. Houghton: I do not know what the patient knows.

Mr. Hiley: The hon Gentleman has said that some patients go to their doctors and tell the doctors what sort of treatment they shall have.

Mr. Houghton: The patient may have read about something that he thinks will do him good. I cannot account for what patients think about the treatment they ought to have. A certain amount of publicity is given to drugs which are available on the Health Service, and privately as well, although many of them are not known to the public at large and are the subject of information to doctors only. I was perhaps indulging in a little editorial licence just now about the relations between some patients and their doctors, but there is a grain of truth in it. I do not want to press it too far.

Mr. Hiley: The hon. Gentleman has so far been very fair, but he is just beginning to exaggerate a little. I thought that I ought to remind him.

Mr. Houghton: I have finished exaggerating. I hope that the hon. Gentleman can now sit back in comfort. I was trying to be very fair indeed. However, I have been speaking for a little while; hon. Members opposite were beginning to look weary, and I thought that I would liven them up.
I must now say something about the sequel to all this. After a few hours hard work on this subject yesterday I returned home last night and saw this headline in the Evening Standard:
Drugs Firms Challenge Government.
The article which followed said this:
British drug industries flung the gauntlet in the Government's face with this challenge: 'If you don't take the pressure off us, research on new drugs will gradually dry up'.

Mr. Kenneth Robinson: We have heard that before.

Mr. Houghton: I will not trouble the House with the whole story. They particularly criticised the Ministry's authority for imports of drugs from other countries. We have all received "The Drug Makers' Own Medicine", by Christopher George, a reprint from the Statist. We must be very anxious indeed about the maintenance of research in the pharmaceutical industry. None of us wants to do anything which will crab or discourage that research from taking place. It is very difficult for the pharmaceutical industry to put itself in the place of an ordinary supplier to an ordinary customer in a field of this magnitude.
I do not think that I can accept the doctrine of the former Minister of Health, which is quoted in a very excellent new pamphlet, The Health of the Nation. The Second Stage of the N.H.S., by my hon. Friend the Member for Willesden, West (Mr. Pavitt). The former Minister says this:
Here, then, I believe is the ground for mutual understanding and respect between the industry and Government: a candid recognition that this ought to be, as nearly as we can make it, a straightforward customer-supplier relationship, the one seeking a good bargain in its vast expenditure, the other side looking to earn a profit in fair competition, and both believing that the public good is served by their respective efforts.
Really, is that a rational description of the relationship between the Health Service, the biggest buyer of drugs in the land, and the pharmaceutical industry?
It must be appreciated that a customer of the size of the Health Service is entitled to special terms and respect and full understanding from the suppliers. I know that the pharmaceutical industry can feel that ft is in a strong position because, in certain circumstances, it does not matter what the Ministry says; the industry can rely on the doctors to buy its stuff. It is a difficult relationship because the principal in the matter may not be the Ministry, but the doctor.
When I put to one witness this sort of question, "Do you ever say to the doctors' You should not prescribe this or that' ", he replied, "That would be more than our life is worth. One cannot tell doctors that they should not;

and, as for 'must not,' that is blasphemy. No one would dare say that. One can tell a doctor that he need not prescribe certain proprietary medicines for which there is said to be by the experts an unbranded equivalent, but that still leaves the doctor to please himself what he prescribes." If research is the problem, different and better arrangements could be made between the Government and the industry to ensure that the fullest measure of effective research is conducted.
Time does not permit me to deal with every matter in detail, so I turn to my last main point, which is how to get full value for money in the vast expenditure the Government are undertaking. Our Report is littered with problems of this kind. There are now to be large new programmes of capital expenditure on schools, hospitals, universities, the Post Offices, roads and public works of all kinds. Millions of pounds will be spent in buying supplies, professional services and other services. How can the State secure the best terms, especially in a large sphere of expenditure where there can be no effective commercial competition?
How many firms can build motorways, manufacture all the equipment for telephone exchanges, and so on? There are monopolistic tendencies in the present situation because some of these works require enormous capital outlay and considerable expertise. It is obvious that they should tend to become concentrated into a few hands. Some things can be put out to tender while others cannot be open to effective competition.
We have research contracts involving the use of the services of organisations which obviously cannot be put out on a conventional tendering basis. The normal relationship between customer and supplier cannot exist in these cases. Private firms in a similar position to that of the Government usually resolve this problem by acquiring an interest in the business of their suppliers, by take-over bids to take control, or otherwise by mergers. Industry is full of subsidiaries, associated companies and groups by which the activities of the main customer are concerned with the products of a number of subsidiaries.
I recall hearing at the time of the I.C.I.—Courtaulds controversy that I.C.I.


regarded it as unhealthy that Courtaulds should be so heavily dependent on I.C.I. for its raw materials. The way to cure that—to relieve Courtaulds of that embarrassing dependence—was to take it over. As a result, what profits Courtaulds would make I.C.I. would share; and this relationship, instead of being between customer and supplier, became one of partnership and unity.
The Government have one hand tied behind their back because they cannot use the same weapons and find similar remedies to those used by private enterprise. If the State were to solve these problems in the commercial way it would be called public control or nationalisation—and these are the last words I must mention this afternoon. I urge hon. Members to study our Report and consider our views on this problem. They should refer to paragraph 15 for our views on the universities, to paragraph 21 for our views on the fees of consulting architects and engineers, to paragraph 25 for our views on furniture and equipment in hospitals and to paragraph 31 for our views on household textiles in hospitals. They will see that our views are all designed to get the fullest advantage from buying big.
We want to lay down economic standards, quality design and use the effective purchasing power of buying in bulk. I sometimes wonder whether it would not be a good idea for the Government to call in someone from Woolworth's or Marks and Spencer's to see how those firms carry on. I am sure that the hospitals, universities and the Ministry could be taught something about buying in quantity. I know how some of it is done. Much of it would not please some of the suppliers of public Departments because it would mean the Departments being able to see how the job is done and they could pass items as they go through the various processes of manufacture.
I appreciate that the Government cannot hold firms up to ransom since they are subject to public pressure. They cannot say that the public must wait for telephones while they engage in a battle with the contractors of telephone equipment. The Government cannot say, "The public must do without medicines while we fight a battle with the pharmaceutical industry." The

Government cannot tell people that they must do without new schools or more hospitals until the Government have come to terms with the professional bodies engaged in drawing up the plans, and so on. All these things must go on and Government Departments are left to do the best they can in this difficult situation. Governments throughout the world are vulnerable in this matter. They can be hit, but they cannot hit back because they are under the strong pressure of demand from those who have put them there.
I can only conclude that what is needed in this situation is a reappraisal by private industry of its relations with the Government, who will become an ever-bigger buyer as the years go by. We need a frank and meaningful acceptance by industry, suppliers and contractors that the public interest is at stake and that the public are footing the bill. They are engaged in a service and not a commercial enterprise in this respect.
Of course they must have a fair remuneration and profit, but they must not be "on the make". Firms should put their cards on the table, open their books and allow people representing the Government to find out the truth of their claims of costs and their processes of manufacture. If the spirit of candour and co-operation between private enterprise and the Government is lacking, the theme of modernisation, which is so full of hope and excitement now, will lose some of its attraction as the Public Accounts Committee continues to disclose the problems and difficulties of getting value for money.

4.50 p.m.

Mr. Arthur Holt: I am glad to have the opportunity of raising one point on the Public Accounts Committee's Third Report. There are a number of others which I should have liked to have raised, but I think that it will be for the convenience of the House if I confine myself to the one point since other hon. Members may wish to join the debate, although that was not very apparent a moment ago.
Paragraphs 75 to 80 of the Third Report deal with the renting of State House on behalf of the D.S.I.R. This building, far too large for the requirements of the D.S.I.R., was taken at a rent of £312,000 a year, a rental equal


to 30s. a sq. it. If a place had been taken further out of the centre of London accommodation would probably have been obtainable at 16s. or 17s. a sq. ft., and had the D.S.I.R. gone out to the provinces, well away from London, the accommodation would have been a lot cheaper still.

Mr. Charles Fletcher-Cooke: The fashionable word now is regions, not provinces.

Mr. Holt: "Provinces" is the word used in these paragraphs and that is why I have used it, as I am sure the hon. and learned Member will appreciate.
In paragraph 80, after the Committee had taxed the Ministry on its policy, it is said that 26,000 headquarters staff have already been dispersed away from the centre and that firm plans are in hand for the dispersal of a further 7,000. I should like to deal with the question of handling these regional developments effectively and, without damaging the efficiency of central Government, how to get centres of real influence out into the regions and consequently secure much greater opportunities for many able youngsters who are going through the grammar schools and the new universities in those areas.
It is no use just sending out a number of civil servants and certain people from industrial headquarters in London unless we move out people of real influence in the country's affairs. I should like to draw the attention of the House to the first two lines of paragraph 78 of the Report:
The Ministry stated that D.S.I.R. had close and frequent contacts with other departments, industrial firms and scientific bodies.
The Report went on to say that it was because of this that the Committee felt that the D.S.I.R. should be near the centre of affairs in London.
I would suggest, particularly to a body like the D.S.I.R., that it is far more important that it should have easy access not so much to other Departments, but to industrial firms and scientific bodies. If that is so, there is less reason for its having to be in London. I suggest in no uncertain terms that the D.S.I.R. be sent North. It is true, of course, that we have had the

Trend Report on the Organisation of Civil Science. If the Government accepted that Report in relation to the D.S.I.R. it would help the proposal which I should like to make.
According to the Trend Report, the D.S.I.R. should be broken up into three groups. I suggest that the Science Research Council, whose job is chiefly concerned with natural resources—and this means land and water—should go to the area where there are most of these, namely, Scotland. If the D.S.I.R. contemplated the large open spaces and the abundance of water in that area it might do something to put those resources to better use.

Mr. Eric Lubbock: Is the hon. Member referring to the Natural Resources Council.

Mr. Holt: I am sorry, did I not say that? I should have referred to the Natural Resources Council.
The second group is the Science Research Council, which is to be chiefly concerned with the universities and the work going on there. I should have thought that its place for easiest access might be the Midlands. There is obviously a very strong case for sending the third division of the work of the D.S.I.R., that which is to be done by the Industrial Research and Development Authority, to the north of England, to the centre and heart of the old industrial England. It is in these areas that many young people are developing from the excellent opportunities now being provided by the advance of our education, but very few of them are able to find opportunities to develop their abilities in their home area.
An excellent centre for this Authority would be Bolton. I think that I should probably carry the hon. and learned Member for Darwen (Mr. Fletcher-Cooke) with me on this, because what applies to Bolton applies in many respects to Darwen.

Mr. Sydney Silverman: Nelson and Colne are half way between the two.

Mr. Holt: Bolton is an excellent centre.
In conversations and in investigations I have carried out over the last 12 months I have been alarmed to find a


complete lack of opportunity for the most able youngsters in the area. There is not a single place where they can go to indulge in scientific research. An extremely able young engineer might find a few jobs available but most of these young engineers would have to seek jobs outside.
We have developed a fine educational system which is still being improved. There are excellent services and this area, like many others in that part of Lancashire, will be a great deal more pleasant a place by about 1970, because probably by then it will be smokeless. There will also be easy access to most parts of the country because we are within a few miles of the North-South motorway and of the Lancashire-Yorkshire motorway going straight across the Pennines. There are around Bolton a number of other towns, with very similar problems in this respect, which would gain tremendously by bringing into the area a group of people who were really at the top and were concerned with the development of industrial and scientific matters.
One criticism often made is that we have done excellent work in theoretical research, but there has not been nearly enough early practical commercial application of what is discovered. If the D.I.S.R. were brought up to the Bolton area, I am sure that it would be a great help. Round about, there are Darwen, Chorley, Westhoughton, Farnworth, and Bury. If the hon. Gentleman who intervened a minute or two ago wishes, we can go up the Rossendale Valley to such places as Nelson and Colne. All these towns would develop and greatly benefit as a result of what I suggest. If the Financial Secretary wishes to put in a special plea, we could include Preston as well.
We all know the nature of the problem. During the past year or two, Bolton has not suffered seriously from unemployment among semi-skilled people such as has afflicted the North-East, but this situation has concealed a serious lack of jobs for the ablest of our young people. I am certain that any money which the Government pour into their regional policy will be wasted unless it is understood that the headquarters of organisations or activities related to the Government must move out into the re-

gions and so create centres of influence enabling out young people in those areas to say to themselves, "If I want to do a big job, I can do it here. I really can influence the affairs of the country by taking part in something within five or 10 miles of my home". At present, this is not so, and they do not stay.
I have no doubt that an evolution of this kind is in the interests, also, of those who live in the South. I can see no solution for the problems of congestion in London and the exorbitantly high rents which are asked for much property around about until the weight, as it were, is taken off London. At the same time, as I have explained, the regions would derive tremendous benefit.
I had in mind a number of other points arising out of the Report, but I felt that it was more useful to concentrate upon the one matter which I have discussed in order to give time for other hon. Members to get into the debate.

5.3 p.m.

Mr. Joseph Hiley: The hon. Member for Bolton, West (Mr. Holt) will, I hope, forgive me if I do not follow him in his geographical excursion into the wilds of Lancashire.

Mr. Fletcher-Cooke: "Wilds"?

Mr. Hiley: I begin my referring to one or two points made by the hon. Member for Sowerby (Mr. Houghton). Taxpayers generally will be reassured, when they read the hon. Gentleman's speech, to know how carefully all forms of expenditure are examined by the Public Accounts Committee. It is not my purpose to criticise the Committee and its efforts, because I am convinced that all forms of Government expenditure must be put under careful scrutiny, but there are times—this is certainly true in private business, at least—when one can attempt to drive too low the price which one is prepared to pay.
The hon. Gentleman began by saying that the Committee did not work on party lines, but it became increasingly clear, towards the end of his speech, that party dogmas were not excluded from its approach to these matters. The hon. Member said that there would have to be a reappraisal of the supply of


drugs to our medical services. He did not elaborate. I do not quite know what he meant. But from what I have been able to read of the argument with the drug industry it seems to me that we should pay a little attention to the industry's success in recent years. I am advised, for instance, that the prices of the 50 leading drugs in use are now 12 per cent. lower than they were three years ago.
The drug companies have a record of achievement which, I believe, is unsurpassed. I do not suppose that the industry itself would take credit for all the recent improvements in medical treatment which have been made, but it is entitled to some credit for the fact that the average stay in hospital in 1949 was 49 days whereas it had been reduced to 34 days in 1961. I make no political comments with reference to those two dates, but it is interesting to note the great improvement which has taken place in the National Health Service during that time, as in so many other ways. Everyone knows that the great killing diseases of the past, like pneumonia, diphtheria and tuberculosis, have all been attacked with great success as a result of the achievements of research undertaken by the various drug companies.
This brings me to the subject of research. How can the research be carried out, and what is the result of the research done by the industry? Having discovered a drug and having tested it, the industry's next step, inevitably, is to give it a name, a brand name. Although I have no knowledge whatever of the industry, I know from general commercial experience that, if one gives any product a brand name, this must of necessity be a guarantee of its high quality. Nobody could afford to advertise and maintain the name unless he was extremely zealous at all times that the quality of the branded article was for ever maintained.
This cannot be said of the non-branded article. I do not deny the possibility that an unbranded article or drug may be equally efficacious, but it does not necessarily follow. So there is good reason why the branded article should be sold at a higher price, and there is good reason also why we should support

this and recognise that the cost of research, often very high, has to be met. Some firms are spending as much as £4 million a year on research, and this can be done only out of the sale of the product on a branded line basis.

Mr. Geoffrey Johnson Smith: Is it not a fact, also, that in exporting the sale of the branded product is particularly important? I understand that the sales of the pharmaceutical industry overseas total about £50 million, a not inconsiderable part of our volume of exports.

Mr. Hiley: I am grateful for that intervention. It was to be my next point.
The hon. Member for Sowerby, reminiscent of the old stumping days, said that the production and supply of drugs was a service and not a commercial operation. As he used those words, I wondered how he would describe the export business of the drug industry. Surely that must be commercial as far as the interest of the nation is concerned. One-third of the products of the drug industry are exported, and, if the names that we have secured for our products can gain the foreign currency which we so desperately need in this country, that, surely, must be done by an efficient home industry and one by which the products of the industry have secured themselves a good name and reputation.
All these things require the support obviously of the biggest purchaser in the country. The drug industry is not making too high profits. The Committee has investigated them. In one part of the Report it states that one firm is losing money. Therefore, I do not think that we ought to try and drag down the industry and make it less effective and less efficient merely on the grounds of cost.
The references to telling doctors about certain drugs, which some describe as a form of advertisement, could more honestly be described, I think, as the giving of information. The drug companies—as this information is supplied by the men of the highest possible qualification—are indeed rendering a great service to the doctors. The information is not necessarily sent exclusively to doctors so as to influence the sale of particular drugs. It is sent purely as


a source of information, and that is why I could not understand what the hon. Gentleman meant when he said that the patients themselves asked doctors to prescribe certain drugs. The bulk of the information which is sent by the industry to doctors is not publicly advertised. It is sent to the doctors in a professional capacity.
I have no more to say except that I think the hon. Gentleman was more moderate than he could have been or might have been, although there was still throughout his speech the suggestion that the drug industry is trying to exploit the nation. That is not so. I think that the nation owes a great debt to the industry and that that is proved by the figures which I have given.

5.13 p.m.

Mr. Laurence Pavitt: On this occasion I wish to follow the hon. Member for Pudsey (Mr. Hiley) and concentrate most of my remarks on the same section of the Report with which he dealt. In his opening remarks, the hon. Gentleman faintly gibed at my hon. Friend for inserting a little bit of dogma in some of his remarks on the way in which drugs should be provided, but I think that the hon. Gentleman responded, in seeking to defend the drug industry, in similar fairly dogmatic terms.
I take it that we all commend the Public Accounts Committee on the way in which it seeks not to make blacks and whites of this thing, and in my comments I hope that the House will not think that I am in any way trying to make out that there is all good on the side of one approach and all bad on the side of the other. I think that the great service that the Public Accounts Committee renders the House is that it deals with the matter in an objective way and does not seek to find blacks and whites but to find out that the expenditure which the public are making through Government sources is well spent. I hope that my remarks will be taken in that light.
I shall be critical of the drug industry, but I would not bow to the hon. Member for Pudsey in my respect for the achievement of the industry since the inception of the National Health Service. However, before I talk about drugs may I say two things? First, I want to con-

gratulate my hon. Friend, because this is the first time that I have participated in a debate on the Report of the Public Accounts Committee with my hon. Friend the Member for Sowerby (Mr. Houghton) as Chairman of a very difficult Committee. In congratulating my hon. Friend on opening the debate, I should like to pay tribute to those who served on the Committee. When we look at the 500 pages of the Report we realise that theirs was no light task, and hon. Members who served on that Committee with my hon. Friend as Chairman should be thanked for all the extra time which they put into the job.
The second thing I want to do before I get on to the question of drugs is to congratulate the Public Accounts Committee and commend it on paragraphs 25 to 30 of its Report, which deals with furniture and equipment in the hospital service. The Committee was quite rightly aware of the fact that we are now in the second year of a vast hospital building programme, not, perhaps so vast as hon. Gentlemen opposite sometimes like to think, because last year it was only £30 million, this year £35 million and we do not get up to £45 million until next year. Nevertheless, for 10 years, especially from 1966 onwards, there is to be a vast building programme, and in the buildings erected there must be equipment.
I think that the Public Accounts Committee has done a service in starting already to look at the way in which hospital equipment is purchased and to seeing if some savings can be effected. I very much like the comments which the Committee makes in paragraph 27 of its Report and wonder whether it cannot take a leaf out of another section of the Ministry of Health's service. On hospital building, it has a department which advises on the best possible way of building. I wonder whether something comparable to that excellent Consumers' Association publication Which? could not be considered from the point of view of the equipment going into the new hospitals.
Everyone who serves on a hospital management committee knows the problems of equipment. Every hospital has the same kind of requirements for beds and lockers. But if one goes into five different hospitals, one finds five


different types of lockers standing by the beds. If we could have a service which explained why certain equipment was a better buy than others that would be very useful and if it was able to extend buying in bulk in a more thorough fashion public funds would benefit. The Public Accounts Committee is doing a good job in drawing the attention of the spending Departments to these matters.
I come now to the question of drugs. We have to realise that it has been Government policy, and also the policy recommended by the Cohen Committee, the Hinchliffe Committee and the Douglas Committee, that as far as possible the National Formulary shall be used because this is a far more economic use of public funds than the spending of money on proprietaries. The Ministry has the Prescribers' Journal in which it tries to keep people informed and tries to persuade doctors not to prescribe proprietary drugs but those on the National Formulary and drugs in the British Pharmacopoeia. But while the Government are concerned to tell the doctors this the industry is spending large sums trying to persuade them to do the opposite.
My hon. Friend and others have referred to the recent publication which hon. Members have received entitled How Equivalent is an Equivalent? I received this morning another very interesting document from one of the leading drug houses which included an article on generic prescribing with the subtitle "A costly bargain." We must realise that there is a conflict of interest here, because obviously the drug houses are seeking to maximise the sale of branded drugs and inevitably the Ministry is seeking to persuade the doctors to prescribe the National Formulary.
One of the main arguments also used by the hon. Gentleman the Member for Pudsey was that if there is a reputable firm—and most of the large drug firms are reputable—there is thereby the guarantee that its products are of the highest possible quality and standard, and, therefore, will serve the patient far better. I wonder whether I may quote one of the things which came not from a report issued in this country but resulting from the Kefauver Report,

from America, on the examination of how this works out in practice in another country. As the House may know, there is a law in America which covers five of the major antibiotics. When a House Committee examined the way in which the law was affecting the preparations being used in the United States, it was shown that
firms as large and reputable as the Upjohn company; Squibb's; Parke, Davis; Lederle Laboratories; Pfizer; Merck Sharpe and Dohme; Commercial Solvents and Eli Lilly have on many occasions in the last two fiscal years been caught marketing sizeable quantities of sub-standard drugs.
I am not making any attack on these firms. This is a highly complicated and technical matter. However, I do not think that the case can stand up because, as some of the Birmingham public analyst's reports have shown, the standard in this country is not always all that may be required. One can equally say that the ordinary dispensing chemist, given an EC. 10 from a doctor, might well be producting the correct quality drug which the doctor was seeking to prescribe for his patient.
In paragraph 39 of its Report, the Public Accounts Committee draws attention to the fact that if we made only a limited attack on this matter there could be a saving of £600,000 a year on five drugs. If such a saving can be made on only five drugs, it is more strength to the Minister's elbow in seeking to persuade more doctors to prescribe from the National Formulary. I wonder whether we are too careful about trying to ensure that the general practitioner keeps his prescribing costs low and in so doing whether we spend more perhaps than we save.
In connection with another part of the Report, my hon. Friend the Member for Sowerby referred to the methods of the firm of Messrs. Marks and Spencer, which have adopted a streamlined system of purchasing. But it also recently adopted a system whereby it did away with all the control forms used in trying to check whether its assistants were helping themselves to the goods. As a result, this concern has saved about 300 forms and certainly a considerable amount of money. It is convinced that at the end of the day it is not losing financially.
Instead of having the very complicated system under which Ministry medical


officers make a check over a complete area after each EC. 10 has been checked and tabulated, with the local average being fixed and those doctors reaching more than 25 per cent. being seen by one of the Ministry's officers, I wonder whether it might be useful to see if over a period of two or three years, as a result of doing away with this check, in a pilot area which most general practitioners resent, we might ultimately save money. In spite of the fact that the majority of drugs are provided through the general practitioner service, I do not think that we can ignore the £15·3 million which it is estimated will be the expenditure of the hospitals on drugs in the coming year. Despite the excellent efforts of the previous Minister in securing bulk supplies and breaking through the monopoly system where the patents law permitted, I am stilt not satisfied that prescribing in hospitals is as effectively checked as is the prescribing of general practitioners. I feel that even more saving could be made in this respect.
In reply to a Question of mine a fortnight ago, the Minister of Health gave the figure of £100,000 as the amount which it cost to keep a check on general practitioners. The answer to the Question about the amount spent on checking hospitals was, "Nothing, Sir". I wonder whether we are satisfied that the way in which prescribing is carried out in hospitals is effective, especially in view of the anomalous position of most consultants being nine-elevenths part of the hospital service and two-elevenths private practitioners.

Mr. Tam Dalyell: Is my hon. Friend suggesting that those of us on the Public Accounts Committee should not look into the question of general practitioner prescriptions? If so, we have then the important problem on our hands mentioned by my hon. Friend the Member for Sowerby (Mr. Houghton), namely, the great difference in areas in the value of prescriptions.

Mr. Pavitt: I would not suggest doing away with the system completely. That would be impossible. We have been using this method since the inception of the National Health Service. However, I should like experiments to be carried out into other means of achieving the same end, because the present

system does not do what it sets out to do and arouses considerable resentment among general practitioners. If more research were carried out into the problem of why in particular areas drug prescribing is high—for instance, why it is much higher in Glasgow than in Surrey—we might achieve a more satisfactory saving on the present rather mechanical way of making an assessment from the aggregate of EC.10s.
To return to the question of consultants, I make it clear that I am making no imputation on their integrity. Their clinical and surgical skill is the backbone of the hospital service. However, I think that they are put in a very invidious position if they have private patients who are using partly the hospital service and partly consulting them in their own rooms. They are then in a situation in which it is not clear whether a private patient should pay for his own drugs or whether that part of the service should come under hospital expenditure because he is partly using the hospital service. I suggest that the pink form which a consultant uses in respect of the hospital service should be available only within a certain area of the hospital where he is employed as a part-time consultant and should not range over a wider geographical area.
The question of sales promotion always comes up on debates on drugs. I will not repeat the figures which were given last year, but for every ten general practitioners there is one drug house representative. I challenge the statement of the hon. Member for Pudsey that it is the drug houses' job to provide the general practitioner, particularly, with information. This is the job of the Ministry. General practitioners should have complete backing. They cannot do their job effectively unless they have the proper tools. The Minister's Prescribers' Journal is a step in the right direction, but it is inadequate. The general practitioner should be given all the information and facilities for effective and economic prescribing by the Ministry that he needs.
The general practitioner is influenced mainly by the representative, but I was interested in recent weeks to receive information from a general practitioner showing the number of mailings he had had over the past three years. In the


three months May, June and July, 1960, he received 485 mailings from drug houses. In spite of the fact that since that time we have had at least two debates on this subject in the House, and despite the fact that there has been much public and professional discussion about it, the comparable figure for May, June and July of this year was less, it is true, but only a few less—469. Hon. Members can work out the number of mailings a general practitioner receives in a day if he receives 469 in three months. A busy general practitioner, particularly if he has 3,500 patients, cannot assimilate the contents of 469 mailings.

Mr. G. Johnson Smith: Is it not true that the general practitioner can write and tell the people concerned that he does not wish to be on their mailing list?

Mr. Pavitt: He can, and he does, but the average general practitioner, especially the large number of practitioners who have no staff to help them—they act as filing clerks and as their own stenographers, writing their own letters—being faced with the need to write another letter, is inclined to put the brochures straight in the waste paper basket. The other point is that he never knows whether perhaps the 469th may not be something like a calendar or a diary which he can usefully pass over to the next patient who comes in.

Mr. Costain: I am following the hon. Member's argument with interest. He said that the Ministry people ought to be the people to tell the doctor what he should do. Does he not agree that the drug manufacturers are the only people who know what their drugs are and that they ought to advise the Ministry?

Mr. Pavitt: No, I do not. I think the Ministry is quite capable, with its scientists and qualified people, in various other Departments, too, of assessing what the properties and indications or contra-indications of a drug are. Of course, when a drug house puts a drug on a market it will provide information. It seems to me that the general practitioner ought to have an authoritative statement in a standardised form from

the Ministry saying just what the properties of a drug are.
I would make a suggestion which would help the industry in this respect. It is followed by some firms already. If all the firms were to give their information in precisely the same form, on cards of precisely the same size, perhaps to fit into a little cabinet which might be provided as an additional service, that would make a useful form of reference. By last year 400 such cards were issued by some of the drug houses, and since my particular Dr. X started collecting them, a total of nearly 500 cards have been collected. What I have suggested would provide a useful, quick, handy reference service, but if there is a large number of assortments of cards of different sizes, with the information being given in different ways, then it is evidently not useful as a form of reference and constitutes only a part of the sales promotion for the commodity.
I think it is true to say that as a result of the work of the Public Accounts Committee a lot of the gimmicks have been dropped. Apart from the excellent sales code which the industry tries to operate, it is true that there has been a diminution of the number of gifts given in trying to promote the sale of products. The fact remains that although doctors do not have to pay for them, nevertheless they are able to secure quite large orders for the drug firms.
It would be helpful, too, if there could be some disentanglement of firms' accounts so that the Public Accounts Committee could be quite clear which part of a firm's activities is devoted to producing drugs and which part of its activities is devoted to the production of something entirely different, fertilisers or some other produce manufactured on a large scale but having nothing whatever to do with drugs or the National Health Service. It must be extremely difficult, one judges from the evidence before the Committee, for the Committee to disentangle the part of a firm's balance sheet what is mainly concerned with drugs and the part concerned with things extraneous to drugs. I think at the same time it would be helpful if there could be clear-cut accounting to show just how a drug house is operating through subsidiaries, so that one could


get to the meat of the problem, instead of having to investigate a number of different balance sheets which make it difficult to form a fair assessment.

Mr. Dalyell: Would my hon. Friend agree that the logical conclusion of this argument is that the Public Accounts Committee should be allowed to summon expert, outside, technical witnesses?

Mr. Pavitt: Yes, I agree with my hon. Friend, who is a member of that Committee.
I would make another conclusion, too. I would suggest that the Ministry would be quite entitled to lay down conditions under which firms would be permitted to supply drugs to the National Health Service, and I think that one of those conditions could well be the way in which accounts are submitted, so that information could be easily available both to the Ministry and to any watchdog Committee of this House which wished to look at it. Let us know just how much is spent on research and promotion in each case. When we are spending millions of pounds I think we are entitled to lay down such conditions. In all other buyer-seller relationships conditions are laid down between the two parties, and I cannot see why the Minister cannot insist that as a condition of being a supplier to the National Health Service a firm should conform to certain standards and certain forms, to be generally accepted.

Sir Hugh Linstead: I am very interested in the point the hon. Member has made, but it would amount to saying—would it not?—that the products of firms not on the list could not be prescribed by doctors under the Service. That would be a very substantial breach in the principle that the doctor is the person who should choose.

Mr. Pavitt: I am grateful to the hon. Gentleman, who knows this matter very well indeed. I accept that this is fraught with difficulties, but I think equally fraught with difficulties is the present situation, where there is a certain amount of mistrust being built up around an excellent industry. I think this is the third or fourth time that in our annual debates on the Reports of the Public Accounts Committee this part of the Reports has been the main item of our discussion. I accept that

no one wishes to interfere with the right of the general practitioner to prescribe that which is best for his patient, but I believe that by consultation and negotiation between the industry, the profession and the Government on a particularly thorny problem it could be got over, and I think it would be well worth while getting over it, to achieve the kind of result which I should like to see achieved.
I would conclude by paying tribute, like other hon. Gentlemen, to the amount which the drug industry has saved by reducing the number of days a person has to spend ill or under hospitalisation, an amount which, in a teaching hospital, is now nearly £50 a week. That is saved by keeping a person out of hospital. At the same time I would be prepared to go further. This is one of the areas where I would be a little idealistic. I should like this to be an area in which manufacturers would be prepared to operate, not just as an industry but as a social and public service, and instead of their amassing profits and then forming foundations and charities to give part back in some form or another, I should like to see them deliberately and voluntarily operating on a non-profit basis, because if there is one area in our social life in which one would like to see no profit made at all it is the area of sickness and suffering. No one would take a penny out of the tin of a blind beggar. Surely it is equally relevant that this business should not be just on the buyer-seller relationship which the previous Minister of Health mentioned in his address to the A.B.P.I. We should look to rather higher standards of service and public spirit and for medicines to be taken, if possible, out of the area of sheer profit making.

5.38 p.m.

Mr. Charles Fletcher-Cooke: I should like to take up and support the observations of the hon. Member for Bolton, West (Mr. Holt) relating to that part of the Third Report of the Committee and found in paragraphs 75 onwards, particularly that relating to State House—and I am delighted to see a representative of the Ministry of Public Building and Works here to listen. It is a most revealing passage because it shows the immense and entrenched influence which the civil servants can


maintain against the efforts of the Government to make them disperse. It seems that the D.S.I.R. insisted on being near Whitehall. That seems reasonable, but they were unwilling to move any part of the headquarters out of London, and then come the most revealing words of all,
or even to Earls Court".
The differences in rent between State House at 30s. a sq. ft. and the accommodation at Earls Court at about 16s. sq. ft. is a very large difference indeed, and the difference in distance—or, rather, in time—between Earls Court and Whitehall, and Holborn and Whitehall, bearing in mind the layout in the inner circle and of traffic generally, is absolutely marginal, and yet in spite of the powers of persuasion of the central Government it was impossible to persuade those distinguished civil servants to move into Earls Court and accept a rental which is about half of what they were prepared to pay. It is amazing.
Then, we find in paragraph 80 that
Your Committee note the Ministry's assurance"—
that is the Ministry of the Parliamentary Secretary who has come to hear what I have to say—
that they are keeping up a constant pressure on Government Departments to accept accommodation in the provinces, where rents are much lower than in London. They observe that some 26,000 headquarters staffs have already been dispersed and that firm plans are in hand for dispersal of a further 7,000.
Where are they being dispersed to?
Those of us who are occasionally lucky enough to have to pay a little Surtax notice that we no longer pay Surtax—the hon. Member for Sowerby (Mr. Houghton) will realise what I am coming to—to a headquarters for collection in London. This, one would have thought, would be all to the good—this dispersal, this regional development—and that it showed that the Government were taking the matter seriously. One might have thought that the work of this fine body of men who accept this heavy tax, but whose functions and work are chiefly clerical, would have been performed in Anglesey, Ilfracombe, the Orkneys, Bolton, the North-East or the North-West, or certainly in Darwen, that it was an ideal function to be dispersed—and instead of one sending it to

London one might expect to address the envelope to one of those outlying regions. But not a bit. To where has this body of men been dispersed?—to Worthing. What good does that do to relieve the pressure on the South-East and to provide jobs for highly-trained people in the areas of which we have spoken? It is a shocking example. If that is what they mean by an attempt to disperse from London, all I can say is that it is not far enough and not taking the matter seriously.
It is not good enough to say that we have all to be within computing distance of Whitehall, and certainly not good enough to say that we will not go even as far as Earls Court, which is what the D.S.I.R. said, even though the saving in rent is very considerable. I support the hon. Member for Bolton, West in this because it is very serious. If I might inject in what is usually a non-partisan debate a slightly controversial note, it is said by the Labour Party that one of the things that they would do to cure this imbalance between the South-East and the Rest is to promote public enterprise to do what private enterprise, they maintain, refuses to do, that is to go to these places. All I can say is that the experience of the D.S.I.R., of those who collect Surtax, and of many other Government services shows that it is just as difficult and recalcitrant, if not more so, to persuade public servants to leave the South-East as it is to persuade private service. It is no good saying that the cure is to direct public enterprise to these areas because, judging by the books, public enterprise refuses to go.

Mr. Dalyell: Is this not a reflection on either the strength or the weakness of particular Ministers?

Mr. Fletcher-Cooke: When the hon. Member, as I am sure he will in his career, has the same experience as the hon. Member for Sowerby has of the great strength and resistance that public servants can put up in this case, then he will be entitled to criticise Ministers as they are today and not before. I appeal to those Ministers today and to any who hope to be Ministers in the future really to see that this dispersal policy is a reality, that the centres of power are dispersed to the areas where we need to give opportunities for people


to exercise power and not to send them to State House, Earls Court, or Worthing.

5.35 p.m.

Mr. Tam Dalyell: It was nice of my hon. Friend for Willesden, West (Mr. Pavitt) to say thank you to members of the Public Accounts Committee. As one who has just completed his first year, I, too, should like to say thank you to the Clerk of the Committee, to the immensely patient shorthand reporters, whose toughest assignment it may well be, and in particular to the Comptroller and Auditor General, Sir Edmund Compton, who has shown infinite patience in explaining the ins and outs of our work.
To return for a moment to the remarks of the hon. and learned Member for Darwen (Mr. Fletcher-Cooke), if it is true, as he says, and I agree with him, that there is formidable resistance on the part of civil servants—the last 12 months has shown me, if nothing else, how formidable they are—nevertheless, it is equally true that certain Ministers have succeeded in dispersal, to Newcastle and to Cardiff, for example, in cases that we know of. If certain Ministers can succeed, why is it that others do not succeed? Is that not a legitimate question?
I would draw the attention of the Minister representing the Treasury to paragraph 15 and ask some specific questions of which I have given notice. All these questions relate to Class IV, Vote 12. May we hear from the Minister what has been done in the last three years since the Public Accounts Committee recommendation that
the University Grants Committee should energetically pursue the further development of standard costs…"?
This particular question assumes added significance in the light of the Robbins Committee's Report and the fact that we may have seven new universities of fairly modest size at a cost of some £40 million plus.
Another specific question is to what extent is there liaison between his Department and the Ministry of Public Building and Works Development Unit under Sir Donald Gibson. Perhaps some time could be devoted to this, as it seems to be of crucial importance. I

thought that 6 per cent. was a significant overall difference between U.G.C. standards and Ministry of Education standards. Surely, sound proofing is as important to the Ministry of Education needs as it is to those of the U.G.C.
In paragraph 17 I was a little frightened by the quotation that
…the Treasury intended to neglect no opportunity of developing further the organisation for securing due economy in the higher education building programme by all available means.
I hope that we will not have silly little economies, purely marginal, which do not save much money, which do not save any significant amount of resources, but which make some difference to the completed building. If we are to make savings, let them be significant and not marginal chips off such-and-such a programme here and there at random.
I refer to Questions 1319 to 1324 that were put to witnesses. No guidance on building design has yet been circulated to universities. Why not? Is not this a rather slothful way of carrying on, and is it not more important than ever, in the light of the Robbins Report, that information and experience should be circulated from one place to another? I realise that since the Committee met last Session, steps forward may have been taken. This is an opportunity to explain any steps that have been taken in recent months.
I draw the Minister's attention to Question 1329 concerning the analysis of cost of special scientific services. Again, the inquiry took place six months ago and we would like to know what has happened since Does it not amount to an argument for zoning certain highly expensive subjects such as plasma-physics, radiation physics and molecular biology at three or four institutions throughout the country?
I do not think that anybody who reads the passage in my Question No. 1345 can be entirely satisfied with the explanations given of the efforts of the University Grants Committee to get expert staff. If a real effort were made, it seems inconceivable that the U.G.C. could not attract a number of fairly young men of vast ability when it can offer such a challenge to them to make their names.
There are two general points which, as a member of the Committee, I should like to raise. One concerns the whole question of universities being excluded from the orbit of the Public Accounts Committee. This was understandable in the last century when there were questions of academic freedom. It was understandable when university expenditure was not all that significant. I do not want to be in the position of being dogmatic to the effect that expenditure by the U.G.C. should come within the purview of the Public Accounts Committee, because there are certain disadvantages in that which are fairly obvious to all hon. Members. At the same time, when university expenditure, as it will do in the late 1970s and the early 1980s, runs to the order of £600 million, £700 million and £800 million a year, questions of democracy arise. Is this order of expenditure not to be subject to Parliament?

Sir George Benson: The expenditure of Government money expended by the University Grants Committee on buildings can come within our orbit if we wish. We had a great battle some years ago with the U.G.C. and established our right.

Mr. Dalyell: Of course, my hon. Friend the Member for Chesterfield (Sir G. Benson), who was a member of the Public Accounts Committee before I was born, is right concerning buildings, but he would agree with me that there are vast sectors of U.G.C. spending which do not come within the purview of the Public Accounts Committee.

Sir G. Benson: We have never claimed anything except to have some say on building costs. We have never suggested that we should interfere in the academic exercises.

Mr. Dalyell: My further reply to my hon. Friend the Member for Chesterfield is that no less a man than the Provost of King's College, Cambridge, in a recent controversy in the Sunday Times, stated that he thought there was, perhaps, an argument for the Public Accounts Committee of the House of Commons having a rather closer look at university expenditure, because in this way it might be possible to persuade public opinion to accept considerable

increases even, perhaps, above what the Robbins Committee recommended.
I do not raise this argument merely for the sake of raising an argument, because there is a point of substance behind all this. That is the question of the extent to which undergraduates should become cost conscious. Of course, I believe that undergraduate education should be basically paid for out of State funds. At the same time, however, I would like many undergraduates and students to have a far better idea than they have now of precisely what it costs their fellow human beings in the community to keep them at colleges of advanced technology or at universities.
There are various ways of doing that. Perhaps it should be that the students be given a full grant, which would mean, for example, that those studying, perhaps, physics at Imperial College, London, would have to pay something like £1,200 or £1,300 a year—an accounting operation. For art students, it might be £500 or £600 a year. For medical students, the figure, I think, is about £1,100 a year. It is, however, important that somehow or other our student generation becomes a little more cost-conscious than it is now, because if they became more cost-conscious many of them might work a little harder. I am certain that there are many students who have not the slightest idea of how much it costs their fellow human beings to keep them, rightly in my opinion, in higher education.
My last point is again generalised concerning the work of the Public Accounts Committee. Hon. Members may have read the long questioning that took place six months ago between the members of the Committee and Sir Harry Melville, as accounting officer of the Department of Scientific and Industrial Research. In what I am about to say, I do not for one moment doubt either the ability or the honesty of the Secretary of the D.S.I.R.—there is no question about that. There is, however, a question of our competence to extract from him the relevant answers to what we really wanted to know. For the sake of clarity, I will argue this in concrete terms.
One of the most important questions concerned the European nuclear physics centre at Geneva. This is not a question


of thousands or tens of thousands of £s. It is a question of tens of millions of £s and, therefore, becomes significant. It is a question, furthermore, of the necessity for setting up a big machine of, say, 28 GeV or some highly sophisticated piece of apparatus. My question is whether we are really competent to put this sort of question. Are we not entirely in the hands of the accounting officer? How are we to argue with him?
I am not saying that any of the evidence which he gave was suspect, but there is a question here that will become much more important in future decades. From now on, the C.E.R.N.s of the world will increase both in number and cost and will not decrease. When this problem first worried me, my immediate action was to write to the former Leader of the House, the right hon. Member for Enfield, West (Mr. Iain Macleod), who very courteously received me and told me that he thought that on the whole it would be unsatisfactory if there was to be a small group of permanent scientists of the staff of the House of Commons, because he thought that power might be unhealthily concentrated among them. This was a rational, understandable argument.
The next possibility was that we should be much better briefed by some representatives from the Research Department.
It is my good fortune that the Chairman of the Library Committee is present, for once again I can put the plea that we should have attached to the research staff at least one qualified scientist, or preferably, as I have suggested before, a qualified physicist, a qualified chemist, a qualified biologist and—possibly more important than any of these individuals—a qualified engineer, so that Members of the Committee, and other hon. Members at all times could consult them. They could also assist in putting forward relevant documents and that, too, would surely be useful.

Sir H. Linstead: I assure the hon. Gentleman that the proposal he has made has been very carefully considered only this afternoon by the Library Committee and that further investigations are being made to see if a

worth-while career could be offered to the right type of people in the Library of the House.

Mr. Dalyell: One is conscious of the problem of status within the House of Commons stiff and that, for reasons of status, it may be felt necessary to take on a fairly young man. I would respectfully disagree with that point of view. Perhaps the best servant the House could have would be someone who has finished his likely research career—someone aged about 45 or 50—and has a mature judgment. Perhaps he could be put in a special category.
I think that the Chairman of the Library Committee accepts the need for members of the Public Accounts Committee—and other hon. Members—to be rather better informed than at present if they are to cross-question the Secretary of the Department of Scientific and Industrial Research. It is not just a matter of science, which is perhaps the most dramatic example. Involved is the whole question of investment in sophisticated industries and in all sorts of international co-operation.
Indeed this covers not only science proper, but many other Departments of State. I think that my hon. Friend the Member for Barnsley (Mr. Mason), if he were here, would agree that, in dealing with the Post Office, it is becoming more and more necessary to have some kind of technical advice. It is on this theme of proper technical advice that I sit down.

6.2 p.m.

Mr. A. P. Costain: As a Member of the Public Accounts Committee from this side of the House, I, too, would like to congratulate our new Chairman on the fair and comprehensive way in which he summed up our work for this year. I feel that this is not an occasion for members of the Committee to speak at length. I think that it is rather a time for other hon. Members who have had an opportunity of reading our work to add their deliberations to it.
As the hon. Member for West Lothian (Mr. Dalyell) has raised one or two points with which I am not in full agreement, perhaps I might be allowed a few moments to dwell on them. I think that the Public Accounts Com-


mittee—and I spoke at some length on this last year—still needs a competent yardstick, a factor by which it can judge efficiency. But I cross swords with the hon. Member on his suggestion of having technical experts whom we could consult in order to cross-question other witnesses.
I do not think that the Committee would be properly carrying out its job if it did that. A board of directors does not have to take evidence from other specialists to enable it to judge whether the information its executive officers are supplying is "bull" or otherwise—to use a very vulgar expression. Members of the Public Accounts Committee are men of judgment who are able to make adequate assessments. I agree that they cannot do so on the greatest technical detail, but even if this Chamber had scientific experts allocated to it through the Library Committee, I doubt if we would be able to encourage the employment of a specialist who would be able to advise on all subjects.
Surely it is the object of each Government Department to have these experts on its staff. I have great admiration for their accounting officers. They have to satisfy themselves about the evidence they get. They themselves are experts and they present their case to the Committee. The hon. Member suggested, however, that the Committee should have the right to call expert professional witnesses.
My knowledge of the Committee is not much greater than his, but we have hon. Members here who have served on the Committee for much longer. I have always been under the impression that the Committee can summon anyone to give evidence and that there is no restriction on the way we should take that evidence. If on a narrow scientific point we are not quite satisfied with the evidence given by an accounting officer, it would be better for the Committee to get the greatest scientific knowledge it can find in the country on that point, rather than retain scientists who would be there for general discussion and a general appraisal of the situation.

Mr. Dalyell: I agree that a retained scientist would be dangerous, for the reasons which were given by the right

hon. Member for Enfield, West (Mr. Iain Macleod). But would it not be sensible to invite, at our own discretion, those whom we think are competent? For instance, the hon. Member might invite Professor Denys Wilkinson and I might have occasion to invite Professor Blackett if we were talking about nuclear physics. Would not the hon. Gentleman agree that he and I are competent to pass judgment on contracting but not on particle physics?

Mr. Costain: I take the point. However, I think that, in turn, the hon. Member is suggesting that the Committee should get down to too great detail. We are dealing with some 500 or 600 accounts. If we were to get expert witnesses on anything that might occur to us, the Committee would have to sit not twice a week but 48 hours a day during the Session. I do not consider that that is the job of the Committee any more than I consider that it is the job of a board of directors to run the executive side of a company. That is really what we are talking about.
We have all paid well-deserved tribute to the work of the Comptroller and Auditor General. He is of invaluable help to the Committee. He himself has a set of experts, and it is surely their job to ferret out information and present to the Committee those items from their reports which it would be right and proper for the Committee to investigate further.
Membership of the Committee is one of the most interesting jobs any hon. Member can have. To me it is a privilege to be on it. The hon. Member for Chesterfield (Sir G. Benson) has, I believe, been a member of the Committee for more than 30 years, and I think he will agree that every year one learns something new. The longer one sits on the Committee the more benefit one can be to the House.

6.10 p.m.

Mr. Cledwyn Hughes: I should like to follow the hon. Member for Folkestone and Hythe (Mr. Costain) in paying my tributes to my hon. Friend the Member for Sowerby (Mr. Houghton), both upon the speech with which he opened the debate and upon his work as Chairman of the Public Accounts Committee during most of the past Session. My hon. Friend came


into the Chair when it was relinquished, to our regret, by my right hon. Friend the Leader of the Opposition when he assumed that office in the early part of this year. My right hon. Friend was a difficult person to replace, and we were very sorry to lose him when he was, as it were, called to higher service. However, my hon. Friend the Member for Sowerby has proved himself to be a most competent chairman and we have been glad to serve under his leadership.
I am glad that my hon. Friend referred to the pharmaceutical industry. Other hon. Members have followed suit, and I, too, want to say a few words about it, because this is a theme which I discussed in the debate on the Public Accounts Report 12 months ago. Contrary to what the hon. Member for Pudsey (Mr. Hiley) said, we are in fact paying an enormous amount annually in our National Health Service bill for pharmaceutical products. It has been our experience during the last few years that it is extremely difficult to ascertain the true cost of production and therefore the reasonableness or otherwise of the profit which these firms make. What we have gathered—and this evidence is available to the hon. Member for Pudsey in the Report if he cares to read it—is that the profit element in the sales of drugs is very large.

Mr. Hiley: Would not the hon. Gentleman regard the export price as a reasonable basis for negotiation on prices, which has been done?

Mr. Hughes: That is true in part, but the Ministry of Health have constantly said during its investigations in the last three years that they are not satisfied that they have had adequate access to all the facts to enable them to arrive at the true profit made by the pharmaceutical firms.
Let me take one aspect of this matter to which the hon. Member for Pudsey referred, namely, the expenditure on advertising and sales promotion. I am glad that he raised it, because I want to take him up on that subject. He did not seem to think that this was a significant factor, but I disagree profoundly. In these days, we are all subjected to advertising pressures of one kind or another, but general practitioners are subjected to sales pressure

almost more than any other section of the community. The family doctor in this country is positively drenched with samples.
I do not know whether the hon. Member has read our Reports on the extent of this expenditure. In 1961–62, the Public Accounts Committee was told that out of total sales by drug manufacturers, amounting to £67 million, the cost of advertising was about £6·5 million, or 9·78 per cent. of the total. We were not given a breakdown of the figures among the firms, but we were told that some spent much more than 10 per cent. of their sales receipts on promotion costs.
This is an exorbitant element in the total sales expenditure. We should also remember that the figure did not include the selling and advertising costs of parent companies in America—I am talking now specifically of the subsidiary companies in this country. The figure of £6·5 million, or 10 per cent., does not include expenditure in sales to chemists, but relates to doctors alone. The costs of sales in the United States are allocated as overhead costs of the United Kingdom subsidiaries, so that in a sense we are paying twice and the element of expenditure on sales and advertising is more than 10 per cent.
I agree that we owe a debt of gratitude to the pharmaceutical industry, but we are not now talking about the efficacy of drugs or the export contribution they make, but the cost of the drugs and especially the cost of advertising. I draw the attention of the House to paragraph 50 of the Report which states that the Ministry of Health had said:
The reasonableness of the expenditure was, however, largely a matter of commercial judgment. They had taken up the question with four firms whose costs seemed high but without effect. They also did what they could to see that doctors were properly informed both in general and in relation to particular drugs.
Paragraph 55 says:
…it is apparent that the Ministry's efforts have been ineffective in securing a reduction in sales promotion costs which they considered excessive. The National Health Service, as the main purchaser of drugs in this country, bears in the cost of those drugs the bulk of the sales promotion expenditure incurred by the drug manufacturers.


That is the bulk of the £6,500 million.
Part of this expenditure is incurred in promoting the sale of proprietary preparations within the National Health Service in competition not only with similar proprietary preparations but with unbranded standard equivalents which are frequently available at lower prices. Although the expenditure is no doubt commercially sound from the point of view of the manufacturer it may involve a twofold extra charge to the Health Service, first for the sales promotion expenditure itself and secondly for the excess of the cost of the proprietary preparations over the cost of unbranded standard equivalents. In order to secure better control of expenditure by the industry on advertising and sales promotion, your Committee recommend that when the Voluntary Price Regulation Scheme comes up for review, the Ministry should press for regular disclosure by all manufacturers of their promotion expenditure in relation to sales.
The hon. Member for Pudsey said that there was a tendency in some hon. Members to be dogmatic, and I think he was referring to the speech of my hon. Friend the Member for Sowerby. However, that is not the case. The Public Accounts Committee is an all-party committee and these are recommendations of a Committee composed of hon. Friends of the hon. Members as well as hon. Members on this side of the House.

Mr. Hiley: Even a Tory can make a mistake sometimes.

Mr. Hughes: The hon. Member has made an admission which is unusual on his side of the House. But it is not one but several Conservatives who serve on this Committee, as do my hon. Friends who are members, in order to serve the House and the country dispassionately. I hope that the manufacturers will take this recommendation to heart and do so at once. They are making very big profits on their products.
I now draw the attention of the House to another aspect of the drug problem. This is mentioned on page 156 of our Report. We found that in one instance the same group of firms was producing virtually the same preparation under different names. The basic drug in this instance is paracetamol. One of the preparations is Panadol and another is Hedex. One is produced by Bayer and the other by Phillips, Scott and Turner, both firms being members of the Winthrop group. Then we discovered that there are two other similar prepara-

tions know as Tabalgin and Calpol made by two other firms. In short we have four products based on Paracetamol being sold over the counter. Why is there this duplication of effort and research in this country with a drug of this kind? I see no reason for it, except possibly to stimulate sales, and if that be the case it must be condemned.
The whole aspect of Pharmaceuticals in this country ought to be inquired into very carefully. For four years the Public Accounts Committee has done its best to elicit information. We have pursued our inquiries as best we could, but there is still a wide field in which we have been unable to obtain satisfactory information upon which to base our calculations and our recommendations to this House. There should be a careful examination of the position, and I hope that a future Labour Government will pursue such an enquiry with vigour, for the sake of the National Health Service, and in the interests of the public purse.
I turn now to a different subject. During the Session the Public Accounts Committee was extremely concerned at the way in which the cost of reconstructing the three Downing Street Houses and the Treasury Building increased. We know the reasons for this, and they are set out in the Report. I am glad that the Parliamentary Secretary to the Ministry of Public Building and Works is in the Chamber to hear this. The increase was due to the fact that the Downing Street houses were occupied right up to the time of commencing the constructional work. I understand that a survey prior to commencing work would have taken anything from six to nine months. No proper survey was carried out, presumably because it would have caused inconvenience to the occupants of those buildings. Perhaps I might add in parenthesis that that inconvenience would have been caused at a time when the Chancellor of the Exchequer was engaged in imposing severe financial restrictions.
The estimate for the work was out by 100 per cent. It increased from £1·25 million in April, 1960, to £2·5 million in November, 1962—£900,000 for Downing Street and £1,600,000 for the Treasury. We, as a Committee, are anxious that proper surveys should be made in future, and that jobs of this kind should be properly assessed. I


hope that the Parliamentary Secretary will convey to his right hon. Friend the strong feelings of the Committee on this point.
As the hon. Member for Folkestone and Hythe said, the Report is available for hon. Members to read, and as a member of the Committee I do not propose to dilate on it further. I often wish that we could debate some of the items in the Report following our examination of witnesses, when the issue is "red hot" as it were. The Report is published in August or September, and we have to wait until December before we can debate the matters which the Committee has been investigating, with the result that in many cases the issues have "cooled down".
The Committee does a valuable back room job, but it would not be able to do so without the assistance of the Comptroller and Auditor General, Sir Edmund Compton, and his staff, to whom we are greatly indebted. There are some critics of this House who, because they do not see hon. Members constantly on their feet at Question Time, or in debate, accuse us of idling away a good deal of our time in the cafeteria drinking tea. The fact is, of course, that on Committees such as the Public Accounts Committee, the Estimates Committee, the Committee on Nationalised Industries and others, hon. Members put in endless hours of quiet and effective work. One of the dangers of televising the proceedings in this House is that it might give the impression that all the work is done in this Chamber. I do not know whether the answer is to televise the proceedings of the Public Accounts Committee, but, in any event, I hope that this Report, which is a good one, will be heeded in all the appropriate places.

6.25 p.m.

Sir George Benson: The function of the Public Accounts Committee has been raised today, and I had better say that it is an extremely narrow one. It is concerned with the expenditure of money by Government Departments. Its first purpose is to see that that money is spent according to the Appropriation Bill which allocates the money for certain purposes, and its second is to see that the money is spent economically.
This is a unanimous Report. It is based on the draft report of the Chairman, which we discuss and modify, but for many years there has been no division in the Committee on the presentation of its Report. We have established a tradition of unity, and a tradition that in the P.A.C. there are no politics. We represent the House as against the Government, and that is the strength of the P.A.C. in this country. I think it true to say that this unity of purpose does not exist in the Public Accounts Committees throughout the Commonwealth which have grown up as a result of our century-old Committee.
Our meetings are normally held in private, but we make one exception. We are always willing to allow members representing the Exchequer and Audit Departments of the Commonwealth to sit in with us. We have done that for a long time and only yesterday three representatives of the Exchequer and Audit Department of Siam listened to our discussions.
When I was Chairman, I always stressed to visitors that we were a united body, and that politics did not enter into our discussions. I always emphasised that in this unity lay the real strength of our Committee. On one occasion a lady from one of the Commonwealth Committees sat in at our discussions. I gave her the usual little homily about there being no party politics, and that we represented the House as against the Government. She was rather sceptical, so I invited her to listen to our discussion and to tell me at the end of the meeting to which party various members belonged.
As usual, the questioning was on non-party lines. We were, as always, a united body, and at the conclusion of our proceedings, feeling rather cock-a-hoop, I said to this lady, "Well, can you tell me to which party so-and-so belongs?" She said, "I think so. I think that gentleman over there is a Conservative, and I think that the gentleman who sits next to him is a Conservative, and those two gentlemen are Conservatives and the gentlemen who sit there are Conservatives." She was right, and it rather took my breath away. I said, "How could you know?" She said, "I thought that their clothes looked rather more expensive".
The most difficult problem that has been mentioned today, and one which has given the Public Accounts Committee plenty of headaches, is the cost of National Health Service drugs. There are so many proprietary articles and so many non-proprietary equivalents that we think that the cheaper, unbranded equivalents should always be chosen by the doctors. On the other hand, it is very much simpler for a doctor to write the name of a proprietary article than the name of a complicated formula for a drug. Unfortunately, from our point of view, the doctor has an inviolable right to do his own prescribing.
Questions concerning hospitals and the medical service have taken up by far the largest part of the debate. The question of economic prescribing and of the freedom of the doctor is admittedly an extremely difficult one, and we have not yet succeeded in resolving it. We probably never shall. On the other hand, in the last year the question has arisen of the purchase of hospital equipment, which is a very different one. In 1961–62, approximately £4 million was spent on hospital equipment. There was a great difference between Scottish hospitals and English hospitals. Apparently the Scottish hospitals have obtained some control over expenditure.
Since the purchase of hospital equipment runs into millions of pounds a year we feel that considerably greater savings could be made than are made at present. In this case we are not impinging on any ethical question of a doctor's right to prescribe. Hospital furniture is either efficient or inefficient. It is about time that the Public Accounts Committee and the Ministry of Health looked into the question of equipment more carefully.
Time is getting on, and we have reviewed the year's work. It is easy to criticise. As Byron said:
Man must serve his time to any trade
Save censure—critics all are ready made.
We in the Public Accounts Committee are critics, and our criticisms over the years have borne fruit.
Lastly, I want to pay a tribute to the Secretary of the Exchequer and Audit Department, Mr. P. J. Curtis, who, for

the last 10 years, has sat with us and with the Comptroller and Auditor General in our meetings. Mr. Curtis is now retiring, and I would like to say, in public and on behalf of the Public Accounts Committee, that we owe him a great debt of gratitude for the service that he has rendered to the Committee.

6.35 p.m.

The Financial Secretary to the Treasury (Mr. Alan Green): I am a novice in respect of the affairs of the Public Accounts Committee. It is by virtue of my present office that I am a member of that Committee, and I want to state simply and directly that I find myself honoured by that fact. If I can do anything at all to help in the work of the Committee I shall gladly do so.
On these occasions it is proper and customary to remind the House of the Committee's main purposes and functions. Both the hon. Member for Sowerby (Mr. Houghton), the present Chairman, and the hon. Member for Chesterfield (Sir G. Benson), a past Chairman, have carried out this proper task very admirably. Indeed, I could not have hoped to hear a more sympathetic and clear description of the essence of the Committee's work than that which the hon. Member for Chesterfield gave. It was so well put that I am extremely doubtful whether I can hold the House at all after that.
In 1961, the present Leader of the Opposition, who was then Chairman of the Committee, said that perhaps it was not going too far to say that the Public Accounts Committee was the only blood sport which was sanctioned by Parliament. The then hon. Member for Dorset, South—now the noble Lord Sandwich—promptly complained that not much blood was shed. I do not feel particularly like a carted stag. Nor do I think that I should have that feeling, because the collective energy of the Committee is turned to the promotion of efficiency and the elimination of waste. These must be objectives very dear to the heart of any Financial Secretary to the Treasury. If it is a blood sport, I am not necessarily the objective of the hue and cry.
It is also true that the objectives of the Committee have no chance of being


met without a most patient application to detail—that hard slogging which may not itself make the headlines but without which no valuable story ever gets written. It is patient work which I am bound to praise, having read the Report and as much of the evidence as I have had time to read. But in an era when printed criticism of Parliament is quite frequent and often-times harsh, it is worth making the point that it is not unreasonable to draw attention in public to what parliamentarians actually do, very often unsung and quite often unnoticed. It is proper also to pay tribute to the immense help that we all receive from the Comptroller and Auditor General.
A second historic and continuing objective was also touched upon by the hon. Member for Chesterfield, namely, that the Committee should be satisfied and be able to record its satisfaction to the House, if need be—and certainly its dissatisfaction—

Sir G. Benson: Do we ever hear a note of satisfaction?

Mr. Green: I have known it to happen. But it is proper to record dissatisfaction if Departments have spent money not in accordance with the parliamentary authority under which they received it. That is a very important function of the Committee.
I trust that it is not mere repetition for a Financial Secretary to the Treasury publicily to remind himself of these two main functions, because the maintenance of obviously good objectives does not necessarily carry any implications of a closed mind, or an aversion to a change of method. In this age, when many hon. Members on both sides are accused of being too conservative in their parliamentary habits, it is worth noting what remarkable changes of method the Committee has achieved over a long period. The conservative process may be there, but it works.
On the general point, I make a short reference to the non-party character of the Committee. We can at least be sung in this respect, that in a Session when hon. Members naturally have felt more concerned than usual with prospects for the next Session, we still managed to work in a non-party way in this Com-

mittee. I am happy to pay my tribute to what the Committee does.
I shall deal with one or two groups of points which have been made, because the discussion has not ranged very widely. I refer, first, to the comments made by my hon. and learned Friend the Member for Darwen (Mr. Fletcher-Cooke) and the hon. Member for Bolton, West (Mr. Holt) on the matter of dispersal from London of civil servants. The Fleming Report, which recommends dispersal and suggests many ways in which it can be achieved, is, I assure both hon. Members, being actively pressed and pursued. My hon. Friend made some play with the removal of Surtax collection to Worthing. I think that he overlooked the fact that it went there almost immediately after the war and it is not part of the present process of dispersal.
What is a part of it, and is a small illustration, though not so small for the people affected, is getting out of London quite a substantial volume of London's P.A.Y.E. work. This is actually being done and I quote it as an illustration that dispersal is being undertaken whenever possible. Before we get too vicious in our attacks on those who do not like to be dispersed—and very few like it— it is well to remember that dispersal may bring more headaches than it alleviates if what is dispersed is policy-making bodies. Then difficulties arise in getting a quick policy decision or a quick execution of it. One has to balance the possible loss of time and money against what is genuinely desired, the dispersal of as many people as possible from the centre of London. I ask that that balancing item should be borne in mind. In my present post I must not give any indications of preference about where we should send them.
A particular kind of difficulty in controlling the expenditure of public money which has cropped out throughout the debate has been in connection with the cost of drugs. It is true that the cost per prescription has increased. The hon. Member for Sowerby gave figures and I shall not repeat them. He will agree, I am sure, that the general rise in costs, the general rise in wages and other cost elements which enter into all things, including drugs, is one of the


causes which contribute to this rise. That has to be borne in mind.
Secondly, in recent years some extremely powerful and efficacious new drugs have been discovered and put to work. I do not know how many failures a drug house has before it produces a really effective drug, but I suppose that it is a very large number. This is where part of the cost comes in and why high profits are sought on the drugs which do see the light of day, for many of them do not.
Those are two elements producing part of the increase in the cost of prescribing. None the less, the Ministry of Health and certainly the Treasury—as I know very well from hearing of it first-hand—continue to share the greatest concern about this particular item of public expenditure and the difficulty of controlling it.

Mr. Ellis Smith: I am a little concerned about the drive for economy in this direction. The Minister knows that I live in an area where people suffer more from bronchitis than those in any other part of the world. When the medical profession arrives at the point where doctors can give preventive drugs, that saves a great deal of time and unnecessary suffering. I hope that that will be borne in mind.

Mr. Green: That was the other qualifying point I was about to make. Of course, it is not possible to gauge the gain that is got from drugs which cure more quickly, more completely or perfectly. That is the sort of gain that cannot be measured.
Nevertheless, we are obviously bound to be concerned with the wide variations in costs of prescriptions and the apparently much less wide variations in efficacy of prescriptions. This is a point which concerns all of us. The hon. Member for Sowerby put his finger on the major difficulty. I think that he used the term "cold war," but I do not want to use that term. There is a genuine conflict, a genuine difficulty, to be resolved here between what I am certain must be preserved—the doctor's freedom—and the desire of all of us, I strongly suspect of most doctors also, to get a proper control over the cost

of prescribing. This is desperately difficult.
The Ministry of Health is taking such further action as is currently open to it. On the Voluntary Price Regulation Scheme, for example, it agrees completely that, unless all members of the industry adhere to it, it cannot work and the Ministry is seeking to get all members of drug houses to subscribe to it. As the Committee knows, the Ministry is doing its best to draw the attention of all doctors to the fact that non-proprietary drugs, suitable for particular treatments, are much cheaper than the branded variety and are encouraging their use.
There is also being pursued the idea of a survey in very high-cost areas to try to establish why these things happen in such places and in such ways as they do. The Ministry is pressing on with this and is very much concerned about it. I am sure that it will seek to do its best to meet the wishes of the Committee in this respect, because it fully shares those wishes.
The hon. Member for Sowerby mentioned the method of working of the Cotton Industry Act. What lay between the Committee and the Board of Trade was basically a matter of judgment whether the scheme was, in fact, sufficiently flexible or not. We are quite satisfied that the Board of Trade had under the scheme quite sufficient means of discovering whether or not a business had really ceased. The Board did not have the power to differentiate in a new way between corporate bodies and their shareholders. We do not think it should have that power. On the point of judgment whether it should or should not have that ability, there is a difference of view between the Committee and the Department. I do not think that I can usefully add to what the Treasury Minute said on that point.
The hon. Member for Sowerby said that he was putting points forward in ascending order and he referred next to getting value for money. Here, the work of the Committee is extremely welcome to the Treasury and, I think, to all Departments without exception. Out of the evidence and thoughts of the Committee come proposals for Ministries to set up groups which can study and produce a standardisation of items,


new methods of purchasing and, perhaps most important of all, a cross-fertilisation of one Department's efficiency with that of another. All these methods of marketing and more efficient purchasing are not only being studied, but increasingly being practised.
I must be frank and say that I cannot report any dramatic new advance in this matter. But I think that the hon. Gentleman, from his own experience, will know that these new methods of purchasing, and preparing for purchase—which is the better way to put it—are being practised on an increasing scale by all Departments of which I am aware. Certainly, it is in the interest of the Treasury to secure that that goes on.
The second major point concerns the universities and was referred to by the hon. Member for West Lothian (Mr. Dalyell). He asked one or two specific questions and put a general point. The U.G.C. is energetically pursuing the question of standard costs. It requires a little more experience before it can begin—I will not say to be dogmatic about standards—rather more to be forceful, clear and helpful to separate universities than it is at the moment. But it is pursuing the point with energy, and I am informed by my right hon. Friend the Minister of Public Building and Works that it is in close liaison with Sir Donald Gibson's Committee, so that there need be no fears about that.
On question of guidance for design, we now have the National Building Agency, which has just been set up and that will have a part to play. All I can say about the problem of attracting staff is that it is a difficulty. Highly-qualified architects are in short supply and that is the plain truth of the matter. But I gather that some recruitment has taken place recently and that they desire to get themselves up to full complement so that they may the more readily and properly do their work.
On the point raised by the hon. Gentleman, whether there should be more or less direct control by the Public Accounts Committee of the U.G.C. expenditure, this has a long history, as the hon. Member for Chesterfield will know better than I. The best way in

which I can answer the hon. Member is to say, and to put on record once again, so that it may remind me if no one else, what was concluded by the Committee on this matter in 1956–57:
Your Committee appreciate that the Treasury have gone some way towards meeting their wishes in the way of closer control, both by ensuring that in future the Accounting Officer is better informed as to the projects on which voted money is being spent and by making a substantial amount of additional information available to the Comptroller and Auditor General. They recommend that the new arrangements should be given a trial over a period of three years, when the matter might be further reviewed by the Committee of the Session then current.
This was done and a trial of three years was accorded.
The Comptroller and Auditor General looked into the matter and made his first report as to the efficiency of the new processing methods. Having made that report the Committee concluded its Report in 1961 with these words.
Having regard to the assurances given by the Comptroller and Auditor General and the Treasury, your Committee consider that the new arrangements have worked satisfactorily, and they recommend that these arrangements should remain in operation, subject to continued vigilance on the part of the Comptroller and Auditor General and to report by him at any time of developments which he thinks should be considered by future Committees of Public Accounts.
I should have thought that in an area as difficult as this, that was a satisfactory report to be able to make. It illustrates extremely well the way in which change acceptable to people difficult to reconcile to this sort of change has been effected through machinery made up of the Public Accounts Committee taking evidence, reporting, and having to receive back—insisting on receiving back—a Treasury Minute which has to carry the argument further. This process of exchange between Committee, Treasury and Department, when everything that is said is published and reported and comes into the open, can provide—as Ministers know to their cost—a continuing supply of ammunition for hon. Members on the back benches. All these factors add up to a first-class vindication of the work of the Committee and the wisdom of the House in retaining the Committee in its present form.

Mr. Dalyell: Has the Minister anything to say about the question I raised


of special scientific services and analysis of their cost?—Committee Question 1329?

Mr. Green: I will look at that question. May I crave the indulgence of the hon. Gentleman and have a word about this with him separately. I do not think that it is, strictly speaking, a matter that concerns the Committee in the way in which it has reported. But I appreciate the interest shown by the hon. Gentleman and I should like to see him separately on the matter.

Question, That the words proposed to be left out stand part of the Question, put and negatived.

Proposed words there added.

Main Question, as amended, put and agreed to.

Resolved,
That this House takes note of the First, Second and Third Reports from the Committee of Public Accounts in the last session of Parliament, and of the Special Report from the Committee of Public Accounts.

Committee Tomorrow.

PUBLIC WORKS LOANS BILL

Order for Second Reading read.

6.58 p.m.

The Economic Secretary to the Treasury (Mr. Maurice Macmillan): I beg to move, That the Bill be now read a Second time.
The main proposals of the Government, and the general object of the Bill, is to give effect to such of the changes proposed in the White Paper on Local Authority Borrowing, Cmd. 2162, as require legislation. Some of the proposed changes do not require legislation to bring them into effect. For example, the proposed control over the temporary borrowing which can be done under the existing Control of Borrowing Order powers. And some of the other changes, such as the formula governing access to the Public Works Loan Board, do not require legislation at all, but are matters for administrative action.
The Bill consists chiefly of provisions designed to increase the sums available for lending by the Public Works Loan Commissioners and to repeal what have, in fact, become obsolete restrictions on

the Board's lending powers and the way in which local authorities are required to account for Public Works Loan Board loans. There are two related matters provided for by the Bill. The first is the removal of certain restrictions on the power of local authorities to reborrow both from the Board and from other sources. The second is an increase in the amount the Treasury can advance to the Government of Northern Ireland for the purposes of loans for public works in Northern Ireland. Earlier provisions for loans to Northern Ireland have been made in the Miscellaneous Financial Provisions Acts,1950 and 1955, and the Bill provides a convenient, and I think an appropriate, opportunity to extend this limit on the Treasury's lending powers. I hope that Northern Ireland Members will welcome it.
It is now about six years since a Treasury Minister last moved the Second Reading of a Public Works Loans Bill. I think that I am right in saying that this is a record interval. During this period new policies and new practices have gradually evolved. These require new Measures which can be brought forward as a result of the experience gained both in inquiries undertaken by the Treasury and from the practices to which I have referred. So I now ask the House to approve a Bill which is a prelude to important changes in local authority borrowing arrangements.
I should like to deal briefly with these borrowing arrangements before I come to the provisions of the Bill. The main Government proposals are that local authorities' temporary borrowing shall be limited to 20 per cent. of their outstanding loan debt and that authorities whose temporary borrowing exceeds this figure shall be allowed four years to get down to it. Local authorities will have freer access than up to now to the Public Works Loans Board. The intention is that local authorities shall be allowed to meet 20 per cent. of their long-term borrowing needs from the Public Works Loan Board in the first year of the new arrangements and that this proportion will rise by 10 per cent. a year until the fourth year, when authorities will be able to meet half their long-term needs from the Board. These loans will be


made at the Government credit rate—that is, the rate at which the Government themselves borrow for similar periods—plus a small margin for expenses.
This proposed control over temporary borowing must be looked at in a national perspective. Local authority borrowing operations are very large indeed. Their annual new borowing is at times even greater than that of the Government. In 1962, new works required £550 million. Re-financing maturing debt, for example, takes about £370 million annually. The scale of local authority borrowing operations is such that it can affect the monetary situation generally, and the Government are bound to take an interest in the pattern of local authority borrowing for this very reason.
During the last few years the pattern has undoubtedly been a great increase in temporary borrowing. The Radcliffe Committee on the Working of the Monetary System commented on it in its Report in August, 1959. At that time the difficulties that this practice could cause—that is, a large proportion of temporary borrowing—was recognised, but we did not then feel that the scale of temporary borrowing was such as to need Government intervention. It was, however, as a result of the Radcliffe Report and the debates which stemmed from it that the Government undertook to collect more information about the whole extent and pattern of local authority borrowing.
It was the information collected as a result of the Radcliffe Report and the debate on it that enabled a close watch to be kept on the situation. It is in the light of the information so collected that we have reached the conclusion that the rate of growth of temporary borrowing should not be allowed to go unchecked. I think that I am right in assuming that others have shared this conclusion. As far as I recollect, reference was made to this situation on the Second Reading of the Finance Bill, 1962.

Mr. G. W. Reynolds: The Economic Secretary has drawn attention to the amount of local authority borrowing. The whole tone of his speech so far has been that local authorities have done something rather

wrong. Would he not admit that this situation has come about only because of the way in which Government policy has forced local authorities to borrow money? Local authorities are not responsible for this situation.

Mr. Macmillan: The hon. Gentleman has somewhat anticipated the point I intended to make. At the moment, I am on the first part of the proposals, which are not contained in the details of the Bill, but in the White Paper which preceded it and which are indeed responsible for some of the provisions in the Bill—that is, the proposals to limit and control local authority temporary borrowing.
I am not suggesting that they were wrong to do it. I merely say that it is a practice which has created certain difficulties for the Government, in money management among other things, and that the extent to which it has happened makes it necessary to put a limit on it. During the various debates there were suggestions that the extent of local authority temporary borrowing would be damaging to local authorities. It is, in fact, a greater danger to Government control rather than to local authorities, because, as various hon. Members have pointed out, including my predecessors at this Box, the Public Works Loan Board has always been available in the case of local authorities not being able to refund short-term debt.

Mr. Douglas Houghton: Is not the Economic Secretary evading the point made by my hon. Friend the Member for Islington, North (Mr. Reynolds)? What the hon. Gentleman is not telling the House is that local authorities were driven on to the market by Government policy announced in 1955. Local authorities found that on the market it was cheaper to borrow short, with the result that temporary loans, many of them on seven-day call, have grown to large proportions. The Government are now trying to rectify that position, but they are dealing with the consequences of their own actions. If the Economic Secretary will deal with that, it will save me exposing it in a few minutes' time.

Mr. Macmillan: That is exactly why I said that the hon. Member for Islington, North was anticipating my point. However, I will make it now. Before


1955 there was a rigid control over local authority temporary borrowing. On the other hand, before 1955 local authorities had unlimited access to the Public Works Loan Board. For the reasons given in 1955—Ihave them all here—if the hon. Member for Sowerby (Mr. Houghton) would like me to repeat them—

Mr. Houghton: No. I have them myself.

Mr. Macmillan: For those reasons and for the reasons also expressed in the debate in 1959 on the Radcliffe Report, it was felt right that local authorities should go to the market. At the same time, in 1955 the restrictions on temporary borrowing were removed. As a result of the Radcliffe Report, and of the debates on it, disquiet was expressed and the Government of the day undertook to examine the problem.
Now we have evolved from there, but not back to the 1955 situation, because we are now trying to create a situation in which there is some limitation on temporary borrowing without the rigidity which existed before 1955, and, in addition, some of the restrictions on access to the Public Works Loan Board have been removed. The complete freedom of earlier situations has not been restored, however. In other words, a compromise has been produced by considering the problems arising from the varying needs of central Government and of local government. If the hon. Member for Sowerby will have a little patience, I shall reach the point later and will make it all over again, if he would like me to do so.
For various reasons which we have dealt with, and doubtless will come on to again, local authorities have tended to regard new temporary borrowing as a method of financing their activities rather than its chief use of being bridging finance. The House will agree that it is difficult to decide what is a safe level of temporary borrowing. The fact that local authorities have always been able to replace short-term borrowing, even at a time of credit restraint or during the withdrawal of foreign funds, by access to the Public Works Loan Board has made it a great deal safer for them than for others.
This does not mean that no risk is attached to local authority temporary borrowing. A risk is always involved in borrowing short and lending long. Although, to individual authorities, the risk may seem small and may seem a price worth paying for the advantage of raising money more cheaply—and I do not blame authorities for wanting to do that—if all authorities were to take this view then short-term borrowing in this part of the public sector would assume vast proportions.
As it is, local authority temporary debt stands at over £1,250 million, and the Government feel that the time has come to limit the rate of growth in this form of borrowing. It is better to do so now, in awareness of the risks which this practice has for monetary policy, debt management and our balance of payments, than to do it later, in a hurry, after a crisis has occurred. It is the recognition of this, combined with the recognition that local authorities have considerable problems of their own—and they have shown a good deal of initiative in overcoming them—that has led the Government to produce this compromise Measure. For national reasons we feel that we must intervene, but this has been done in a way which will minimise the impact of the new arrangements on local authorities.
It is for this reason that we have given those local authorities—and there are only 300 of them out of a total of about 1,800—whose debt exceeds the new limits four years in which to get down to those limits, and we hope to see a progressive reduction. In addition—and here I come to the Bill rather than the White Paper—the control of temporary borrowing will be linked to the new arrangements for giving access to the Public Works Loan Board and for making loans at the Government credit rate. This is the main purpose of the Bill.
The reason for the change is simple. If local authorities' freedom to borrow temporarily is to be restricted, they must raise more money longer term and they could, in theory, be required to find it on the market. This might place undue strain on the arrangements, particularly as capital expenditure on housing, education and other services is increasing


sharply. The Government have, therefore, taken the view that local authorities should have greater access to the Public Works Loan Board than in recent years, but that the same considerations which applied before should mean that that greater access should be for some of their money only. In conjunction with that, it is no longer necessary for the Board to charge the local authority the market rate on such money. Thus the Board will make its advances at the Government rate.
This will cheapen the long-term rate at which local authorities borrow. As the four-year period advances that advantage will accrue to more local authorities. Ultimately, they will be allowed to borrow all but half of their total long-term borrowing needs. The idea is that this should be met by a gradual change of that proportion. If we were to put it up to half at once it might increase the demands on the Exchequer by as much as £500 million a year and monetary management would be seriously complicated by a shift of this size.
In the first year local authorities will be able to meet 20 per cent. of their needs from the Board. In the second year the figure will be 30 per cent., in the third year 40 per cent. and in the fourth year a half. It is not intended to apply this formula rigidly, in a way which might create difficulties for authorities with modest borrowing requirements and which already get a substantial proportion of their funds from the Public Works Loan Board. We propose, therefore, that every authority should be allowed to meet the first £50,000 of its long-term borrowing needs from the Board.
This arrangement means that between 300 and 400 local authorities can meet all of their borrowing needs from the Board—that is, the smaller authorities—during the first year. The main beneficiaries of this ruling are likely to be the rural and urban district councils in England and Wales and the small burghs in Scotland. Many more authorities, including a number of the small non-county boroughs and large burghs in Scotland, will also benefit from the arrangement.
In subsequent years it may be possible to allow local authorities to borrow up to £100,000 from the Board, if this is

greater than their percentage quota for the year otherwise would be. These quotas are based on the assumption that local authorities will be able to find the rest of their needs on the market. This should be possible because the total calls on the local authority market will be reduced. We shall certainly expect local authorities to do their utmost to get the balance of their money in this way. There is, however, a chance that some will not always be able to find the funds they need on the market at a particular time. The Board will, accordingly, continue to act as a lender of last resort and will make additional loans if it is satisfied that an authority cannot raise the money on the market.
These additional loans will normally carry interest at the local authority market rate, not at the gilt-edged rate. In certain circumstances the Board may permit an authority to offset an additional loan against its quota for the following year. The Board will also have discretion to permit an authority to adjust, in the same way, any inadvertent over-drawings.
It is estimated that the call on the Exchequer under these arrangements will amount to £200 million in the first year and rise by about £100 million each year to £500 million in the fourth year. Actual lending by the Board will be rather higher, since the flow of repayments to the Board permits a certain amount of money to be advanced without the need for new Exchequer issues. In the first year, for example, the Board could lend up to £240 million without the need for more than £200 million being advanced by the Exchequer.
I turn to the provisions of the Bill. The first and most obvious need which the Bill meets is to increase the sums at the disposal of the Public Works Loan Commissioners. Clause 1 provides £650 million for this purpose. This should permit the Board to operate the new arrangements for about two years after the introduction of the measures set out in the White Paper. The Clause also provides necessary matching provision for Board commitments. The provision covers two years because we felt that it was desirable to get adequate experience of the new arrangements before coming back to the House for a further increase in the sums to be placed at the Board's disposal.
Clause 2 consolidates and amends the Treasury's existing powers to fix and vary the rates of interest charged by the Board. To a large extent, the provisions of this Clause actually reproduce existing legislation, but the Clause is also designed to provide for the introduction of the dual interest rate system described in the White Paper.
Clause 3 provides for a number of repeals in existing legislation about the terms on which the Board shall lend and in the law relating to temporary borrowing by local authorities in Scotland. I do not think that I need go into this matter in detail.
Clauses 4 and 5 provide for the write off and remission of various nineteenth century loans to four harbour authorities. In all these cases, the harbour revenues have proved insufficient to meet the Board's loans, either because of a fall in the number of vessels using the harbour or because expenditure on essential repairs has exceeded expectations.
Clause 6, which I found rather complicated, amends and qualifies the powers of a local authority or other public authority to reborrow when the original borrowing is repayable by instalments or by sinking fund. With the development of borrowing and accounting techniques, some of the provisions contained in the Local Government Act are more difficult to apply and in some circumstances might be held to impede reborrowing. For example, as the law stands there is doubt about an authority's power to reborrow where it originally borrowed for less than the loan sanction period. This seemed a suitable opportunity to clarify the law in that respect.

Mr. Houghton: Does the complexity of Clause 6 explain why it takes only three lines in the Explanatory and Financial Memorandum to tell us all about it?

Mr. Macmillan: I think that the complexity of the Clause is caused by the difficulty of the subject rather than the Clause, and perhaps it was felt that hon. Gentlemen who had anything to contribute on the Clause would have a deep understanding of the subject.
Clause 7 increases the limit on outstanding Treasury advances to the Government of Northern Ireland for the use

of Northern Ireland Government Loans Fund. This fund makes loans for public works, mostly to local authorities in Northern Ireland. Originally, power to make loans for this purpose was provided for in the Miscellaneous Financial Provisions Act, and the limit on such loans was increased from £15 million to £30 million in 1955. Outstanding advances amount to over £23 million. Calls on the Government Loans Fund are expected to rise in future when the Northern Ireland Government introduce similar changes in the borrowing arrangements for their local authorities. It seemed appropriate, therefore, to take powers in the present Bill to increase our contribution towards the Government Loans Fund.
Clause 8 provides for any increase in rate-deficiency grant or Exchequer equalisation grant that becomes payable as the result of any increase or rephasing of local authority expenditure arising from the changes in borrowing and accounting arrangements under the Bill. It is customary to include a provision of this kind whenever there is a possibility of this sort of thing happening.
I am sure that there will be some reference in the speeches that follow to going some way back to 1955, but not going back far enough. It is fair to say that although there is a feeling that local authorities should be allowed more liberal access to the Public Works Loan Board and that we should allow them to borrow as much as they like, there are equally valid reasons why this cannot be done. As hon. Members will know, these reasons were rehearsed in 1955 and again in 1959.
The reasons, broadly, are three. The first is that it is extremely difficult, in practice, to allow more liberal access. Local authority borrowing is now in the region of £1,000 million a year. It is hardly feasible to give local authorities freedom to borrow from the Public Works Loan Board up to this figure. It would create a great problem for the Exchequer and for monetary management. The amount of money involved is too great for us to switch over from this heavy reliance of local authorities on market borrowing to equally heavy reliance on borrowing from the Exchequer.
Secondly, it is felt that it is hardly prudent to allow local authorities free


access to Government funds at a time when other calls on the Exchequer are rising so rapidly. In the next few years there will be increasing demands on public funds for a wide variety of purposes such as higher education, roads, ports, and the expansion of the electricity industry. Against this background we feel that it would be unwise to allow local authorities to pre-empt too much of Government funds even though the additional amount that they borrowed would be balanced by a pro rata fall in the amount of market borrowing. There is a limit to the amount of switching that can be done between private and public sources of capital. Our chief concern is to avoid taking on commitments which might be difficult to fulfil later on.
The third reason for allowing only limited access to the Public Works Loan Board is that experience during the last few years has shown that the larger authorities, at least, can raise the funds they require on the market. There is no doubt that in the last few years the technical skill of local authorities in market borrowing has increased and it would be foolish to make arrangements that gave them no opportunity or incentive to exercise their skill, especially at a time when the other calls on the Exchequer will be rising so much.

Mr. Frank Allaun: The hon. Gentleman says that he thinks local authorities should not be prevented from exercising their ability to obtain money in certain quarters, but is it not true that the Bill will do precisely that? Is it not true that many of the largest authorities, such as Leeds, to avoid paying excessively high market rates of interest, are borrowing short-term in large amounts and that the Bill will restrict their ability to do this and thereby will involve the citizens of Leeds and of other big cities in paying hundreds of thousands of pounds extra in interest?

Mr. Macmillan: I am sorry that I did not make it clear to the hon. Member that this is not because of the Bill, but because of the measures which the Government are taking. The Government decided to take these measures because it was felt that the amount of short-term borrowing had increased dangerously over the last few years.
I tried, apparently unsuccessfully, to explain, at the beginning of my speech, that this was a compromise and that we have not reverted to the pre-1955 situation, when local authorities had unrestricted access to the Public Works Loan Board but had also, to all intents and purposes, a complete prohibition on their borrowing short and raising temporary funds and when, therefore, the level of their loans was marginally below the market rate from the Public Works Loan Board. In the intervening period, between 1955 and the introduction of this method, the situation was that there was no restraint on local authorities' short-term borrowing but there was a strong restraint on access to the Public Works Loan Board.
Experience which has developed since then and the investigations which the Government undertook to make and subsequently made have indicated that a compromise solution was the best for the Government and the local authorities together. There is no question but that this is a compromise. It is appreciated that the burden on the ratepayers will be increased, but this is only likely where local authorities have contributed to the situation by the extent of their short-term borrowing. This is a compromise between the burden on the ratepayers and the danger to the taxpayer.
I realise fully that these proposals will not be welcomed universally by local authorities. I know that some feel that the limit on temporary borrowing is too stringent, and even that there should be no limit at all. Others would like bigger and quicker access to the Public Works Loan Board. These proposals equally are not ideal from the Treasury's and the Government's point of view, because this is a field in which the needs and interests of the central Government and those of local government are not identical. We should not be too dogmatic about the needs of local authorities because they, too, have varied widely, but within that variation the present compromise seems to accommodate a reasonable proportion of short-term finance and reasonable access to the Public Works Loan Board with the balance, up to a half at the end of the interim period, from the market. The Public Works Loan Board will always be there as a source in the last resort.
I must express my gratitude to the local authority associations and those local authority treasurers who have helped us to frame these compromises. The proposals are Government proposals, but they have been reached by a process of consultation. I believe that we have reached a sensible compromise which holds a reasonable balance between the responsibility of the Government for the efficient management of our monetary policy and the responsibility of local authorities to raise money as cheaply as is consistent with prudent financial practice.
This view is not mine alone. It was more or less quoted in an article by Ronald Bird in the Banker in December this year, in which it was said:
…local authorities will have a wide range of decision over the shape of their borrowing from the board, and will no longer be subject to the governessy limitations imposed on them under long out-of-date statutes. It begins to look, indeed, as if both the methods and instruments of local borrowing are being given a contemporary shape.
That is the opinion of the Government. It will, I hope, be the opinion of the House.

7.31 p.m.

Mr. Douglas Houghton: I apologise to the House for imposing myself in its debates for the second time today, but as I do not think that any hon. Member present now was here at 4 o'clock when I began for the first time, perhaps the tedium will be reserved for those who read Hansard tomorrow, which will be very much like my parish magazine.
Whenever a Minister comes to the Box to make an announcement or to introduce a Bill nowadays, he ought to come in on his head. The Economic Secretary should be leaning backwards, now because the policy he has introduced in moving the Second Reading of the Bill reverses the consequences of earlier policies. This goes back to the second Budget of 1955, a historic year Budget-wise, and we may well see a repetition of 1955 in 1964 because we then had a Budget in the spring, a short Finance Bill, Budget Resolutions tightly drawn, the House visibly in decay, and then off we went to the General Election in May, 1955. On 26th October, 1955, the then

Chancellor had to put right all the silly things which had been done wrong earlier in the year.
The House will recall that that was the year in which substantial reductions in direct taxation were made in the April Budget, and the tax reliefs then given were reimposed not on the direct taxpayer but on the housewife's pots and pans. That Budget became known as the "pots and pans" Budget, and in it came the restrictions on the freedom of local authorities to borrow, which the Bill is intended, in part at least, to remove.
When the Government wished to put a check on the total volume of borrowing by local authorities, they threw them on to the market to sink or swim. They told those that were in danger of sinking that they would be rescued by the Public Works Loan Board, but not until there were visible signs that they were sinking were they to go for rescue to the Public Works Loan Board. Even when they did, they were to be given terms of interest representing not the Government's credit to borrow but the particular local authority's credit to borrow which might not be as good as that of the Government, and, therefore, they might not get their money as cheaply. This was the policy which the Government pursued to curb the borrowing of local authorities.
Now, when local authority borrowing is to be increased, the Government are pulling them back sharply from the market and not letting them pursue the ways which were forced upon them by the policies of 1955, the dangers of which were mentioned by the Radcliffe Commission in 1959. What the local authorities have done, of course, has been to make the best of the position in which they were put in 1955. They have found a way of meeting their loan requirements which is now an embarrassment nationally to the position of sterling and which the Government wish to correct.
Local authorities found that they could borrow short-term. They found that they could borrow more cheaply short-term than long-term. The result now is that the short-term borrowing of all local authorities amounts to nearly 25 per cent. of the local authorities' total debt, and of this temporary borrowing 62 per cent., that is, £800 million out of £1,300 million.


is on seven-day loans—money within call on seven days' notice.
A good deal of this is hot money, admittedly. When the Government, as part of their financial measures, put the Bank Rate up to 7 per cent. and local authorities had then to pay 6¼ per cent. on their temporary loans, hot money came in from abroad attracted by the high rates of interest. The Government were, in fact, buying support for sterling and making the local authorities foot the bill. In came money from abroad supporting sterling, and the Government made the local authorities pay for it because that was the only borrowing which they could undertake to satisify their needs.
The Government have now got a bit frightened. The Radcliffe Commission drew attention to what was happening, but the Government did not think that there was anything very much to worry about then. Now they think that there is. Why?—because local authorities will now have to borrow more, and, if they are left alone, they will go on borrowing in the way that suits them best, which may mean that they will go on borrowing a great deal more on short term, and this represents, from the point of view of the national Exchequer, a danger and an embarrassment. The Bill is designed to correct this because restrictions are to be placed upon the proportion of the local authorities' total debt which they may borrow on short-term conditions.
As I have said, nearly 25 per cent. of the local authorities' total debt is on short term, and the Bill proposes that the proportion should be reduced to 20 per cent. Undoubtedly, some local authorities will find themselves with a higher proportion of short-term loans than they will be allowed to have when the Bill is fully operative. It is being done by instalments. It is being done gradually, in order, as the Economic Secretary said, to reduce the impact on particular local authorities.
This really is an important Bill because, as the Economic Secretary pointed out, it has to do with large scale financial operations by local authorities to fulfil the national plan, if there is such a thing. Local authorities will have to borrow more for the expansion of housing schemes and many other

local authority works such as modernisation and clearance schemes. What is worrying a number of local authorities about the Bill's proposals is whether they will have to pay more, not less, than they are paying now. At times, the rate of interest which local authorities have paid for short-term borrowing has been 2 per cent. lower than the rate being charged by the Public Works Loan Board. They have been borrowing below the market rate and they have had the advantage of that. In a great many cases they have not been upset by the short-term call on their money because it has not been called in, or, if it has, they have been able to make alternative arrangements.
I should like the Minister to explain a little more the relationship between the lending rate of the Public Works Loan Board and the borrowing rate which local authorities may have to pay for loans on mortgage and other outside financial accommodation. Has any estimate been made as to whether local authority loans will, on the whole, be more costly under the Bill than before? Is this really a Bill to adjust the overall financial implications of what local authorities have been doing? Or is it intended to help local authorities, because some of them certainly would be able to continue to get what they want outside the Public Works Loan Board, although I think that it must be admitted that, with the stepping up of local authority expenditure, it is unlikely that they could meet all their requirements in this way. This goes to the very heart of the cost of local administration and local government.
When one thinks of the enormous tribute which is being paid by this nation for the use of two commodities only, land and money, one realises how much is being extracted from our resources to satisfy the demands of those who possess these two things. In terms of the national well-being, our productive capacity and the improvement of our wealth, I regard what the nation and local authorities are paying for money and land as a gigantic extortion from the wealth of this country. There is nothing in the Bill which will facilitate local authority borrowing on terms which enable them to do their work and satisfy the demands of their citizens at reasonable cost.
I am glad that my hon. Friend the Member for Salford, East (Mr. Frank Allaun) is here, because on 3rd December he asked the Chancellor of the Exchequer to
reconsider reintroducing the 3 per cent. maximum rate which applied under the Labour Government".
The right hon. Gentleman said:
No, Sir. Our assistance to local authorities is very large and is growing. We think that the right way to subsidise local authorities is in this more open way rather than by providing hidden subsidies in the form of artificial rates of interest."—[Official Report, 3rd December, 1963; Vol. 685, c. 953.]
Since when have the Government been so puritan on this question of subsidies and the desire not to hide things when aid is being given in the public interest?
If one surveyed the whole field of subsidies, which we were doing earlier when we were considering the Report of the Public Accounts Committee, one sees plenty of things which are not exactly exposed to public view. The ordinary person would not see them unless he had a very good look. In any case, the point is that one utilises financial aid and subsidies in order to achieve certain results. It is not, I think, a matter for a doctrinaire approach to the question of subsidies.
At one time the Government were appalled at the idea of subsidising public enterprise. But they do it freely now. They objected to subsidising other activities because they thought that they should be made to pay. But the Government are having to do it quite freely now. The question of differential rates of interest, which the Chancellor of the Exchequer calls artificial rates of interest, has attracted a good deal of attention. I think that there is nothing wrong financially, socially or politically in lending money for approved public purposes at a lower rate than would be payable in the market, the Government covering the difference between their borrowing rate and lending rate.
There is nothing wicked about that. It may be a matter of considerable argument whether it should be done that way and whether it would achieve the desired purposes rather better than an alternative method, but I think that this solution to local government borrowing may have to be considered as time goes on because local authorities will be

borrowing increasingly large sums of money for their essential operations. Interest rates as a whole are too high, and I should think that a great honour awaits the Government which can bring them down because there is no doubt that in present circumstances the public is paying a great deal too dearly for the use of money.
Turning to the narrow issues raised by the Bill, we want to know what will be the effect on the interest rate at which local authorities will borrow. We are told that this money which will be borrowed from the Public Works Loan Board will be made available at Government lending rates—that is, the rate at which the Government borrow with a small addition to cover Exchequer costs. They will add on the costs of postage, telephone calls and all the other incidental expenses connected with these operations.
I think that I heard the Economic Secretary talk of preferential rates, or differential rates. Will there be differential rates? This is very important. Will local authorities be forced off short-term borrowing at lower rates of interest on to mortgage or other loans at a higher rate of interest, or on to the Public Works Loan Board, also at a higher rate of interest? That is a crucial question, and it will affect some local authorities much more than others.
We will be able to examine the Bill, including the complexities of Clause 6, in Committee. That may give us an opportunity of going more fully into the possible effect of some of the provisions of the Bill. I am sure that the House will be glad to know that there has been close consultation with the representatives of the local authorities. It is at least a comfort that they have looked at the matter broadly from their point of view. We hear that they regard the proposals as a fair compromise, which rather suggests that the Government were pressing them, in the first instance, further than they thought they should go. It rather seems as if this was not the bountiful gift from Her Majesty's Government which was being taken to the local authority associations. It was something that they did not like when they first saw it. This, we are told, is a reasonable compromise. It is not, therefore, a beneficent Bill after all. This is a form of discipline.

Mr. Maurice Macmillan: It is possible to have a compromise between two sets of interests which is not necessarily arrived at by a battle between two groups of people.

Mr. Houghton: We shall probably hear more about the battle, if there was one, by the time the Bill gets to Committee, because when there are differences of opinion we are not usually kept in ignorance of them by the local authority organisations. We shall be glad to hear what they have to say.
I can only test the matter out for myself with local authorities in my constituency. They are small ones, as the Economic Secretary knows, because our constituencies are neighbours, and very good neighbours, too, and it pains me very much to have to talk sternly to the hon. Gentleman. The local authorities which I have consulted have very mixed feelings about these proposals and they have expressed the fear, of which I have spoken, that at the end of the day they will be paying more and not less for their local authority borrowing.
We shall not, however, oppose the Bill, because it is obvious that in present circumstances something has to be done if for no other purpose than providing a satisfactory starting point for this very large expansion of local authority activity which will require them to borrow a good deal more money in the next few years than during the last four or five.

7.52 p.m.

Sir Knox Cunningham: I do not wish to take up the time of the House for more than a few minutes, but I want to welcome the Bill and to refer to a few matters which affect Northern Ireland.
I agree with my hon. Friend the Economic Secretary that it is not necessary for me to deal with Clause 6, because, although the aim is clear, it is a little complex. On the other hand, Clause 5, which goes with Schedule 2, is a Clause which extinguishes a debt which is between 90 and 100 years old—a loan of £80,000 to the Carlingford Lough Commission.
As the House knows, Carlingford Lough is a strip of water which divides Northern Ireland from the Republic of

Eire. The work for which the loan was given was largely on the Northern Ireland side, and at the end of the lough is the Port of Newry. I am happy to say that when the Government of Northern Ireland took over that part of Ireland the debt was not transferred to them. This is, therefore, of no direct interest to Northern Ireland, but I am happy to welcome the breath of realism which my hon. Friend the Economic Secretary has brought to the extinguishment of the debt.
A matter which is of real importance to Northern Ireland is that of the increase in the loan limit by £10 million. My hon. Friend has referred to the Miscellaneous Financial Provisions Act, 1950, under which the Treasury was empowered to make loans to the Northern Ireland Exchequer. A limit of £15 million was then fixed for capital outstanding at any one time. In 1955, this limit was extended to £30 million and the Bill seeks to extend it to £40 million. As my hon. Friend has mentioned, only £23½ million of such loans are now outstanding. Thus, under the existing provisions, there is still room to borrow £6½ million.
Public investment has for many years been maintained at a high level in Northern Ireland. A large part of that investment is carried out by local authorities with the aid of Government loans. This is particularly true of housing, which makes by far the largest demand on the Government Loan Fund. The figures to which I have referred show that it is not a lack of capital which is at present responsible for restricting development in industry and the absorption of the unemployment pool, but rather physical shortages, for example, a shortage of skilled labour. It is the speedy training of skilled labour that will be the solution.
The Hall Report dealt with this matter in referring to restrictive practices in the building industry. It is surely in the public interest and also in the interest of labour and management to get rid of restrictive practices in Northern Ireland and to develop to the full methods of apprentice training. I greatly hope that the trade unions and management will get together with this aim in view. If they do, it will prove to be a way to conquer the spectre of unemployment in Ulster.
As capital investment rises in Ulster, there will be larger and larger demands for loans; and the Treasury has agreed to meet a substantial part of such loans from the United Kingdom Exchequer. That is the reason for the limit of such loans to Northern Ireland being raised in the Bill from £30 million to £40 million of capital outstanding at any one time.
A further technical matter is raised in Clause 7(2), which construes that references in the United Kingdom Statutes to these loans shall not be affected if the Northern Ireland Parliament amends the Government Loans Act (Northern Ireland), 1957. That is a technical point, but its purpose is to clear that particular matter.
For the reasons which I have given, we Ulster Members welcome the Bill and give it our support. It will be of considerable help to Northern Ireland and I trust that soon, with the efforts of my hon. Friend, it will be on the Statute Book.

7.58 p.m.

Mr. G. W. Reynolds: I am glad that on behalf of Ulster the hon. Member for Antrim, South (Sir Knox Cunningham) has welcomed the Bill, which is yet another example of the Government's slow, creeping move towards Socialism which we have seen happen quite a lot during the past few months.
I am disappointed that in moving the Second Reading of the Bill the Economic Secretary to the Treasury appeared to go deliberately out of his way, whilst not actually saying so, to put the blame for the situation upon the local authorities. He was not even as generous as the White Paper, which, frankly, does not go very far. It states, in paragraph (2):
This is not to criticise local authorities who have sought to adapt their borrowing practices to meet both their growing capital commitments and the conditions prevailing in the capital market.
That is all right as far as it goes, but the main reason is not the growing capital commitments or the conditions prevailing in the capital market. The main reason is that in 1955 the Government deliberately decided that local authorities should be forced to finance their capital expenditure on the market.

Having deliberately forced local authorities to do that, the Government are not admitting their part in the responsibility, because the local authorities have discovered very quickly—and many of the treasurers responsible for this work had little experience of it before the war—the best way to operate in the free market, which is what the Government wanted them to do. Now, the Government are putting restrictions upon their free operation in the market, having forced them on to it only eight years ago.
It is not the fault of the local authorities that these restrictions have become necessary. They have become necessary, we are told, because of the general position concerning hot money. But also, as the Radcliffe Report pointed out in 1959, because the operations have "gone on too long to be without effect on the market for the central Government's bonds": in other words, because the local authority treasurers were getting, perhaps, a little too efficient at this game for the liking of the Government Broker and the Treasury, because they were not receiving as good a deal as they hoped once they forced the local authority treasurers completely out into the market.
In moving the Second Reading of the Bill, the Economic Secretary also used the phrase that the time had come to limit the rate of growth of this short-term borrowing. That is rather different from the general tone of the White Paper, which, in paragraph (3), states that:
The essence of the proposals is that a limit should be placed on local authority temporary borrowing".
It goes on, in paragraph (9), to say that:
action must now be taken to limit temporary borrowing".
The Minister, however, referred to the time having come to limit the rate of growth, which is rather closer to the intention of the Government than is the White Paper, because my view is that it will not in the next year or two reduce the amount of such money on short-term borrowing to local authorities and it will in the future not hold the amount even at its present level but will limit the growth for such period as the Act remains in force.
This is a death-bed repentance of the Government and a complete reversal of


their former policy. The Parliamentary Secretary to the Ministry of Housing and Local Government can use the expression which he is now wearing, but even he must admit that this is a complete reversal of Government policy since 1955. There is no way in which the Government can escape the charge of trying, in effect, to blame local authorities for operating in the way in which the Government have wanted and forced them to do since1955, when we were told that the local authorities must stand on their own feet and pay the market rate of interest, as my hon. Friend the Member for Sowerby (Mr. Houghton) has said. Now, we are being told that local authorities can have money at the Government's rate of credit. If that is not a complete reversal of Government policy on these matters, I do not know what is.
The Government have been making quite a nice profit from the operations of the Public Works Loan Board for the last eight years. Admittedly, the operations have not been on a very large scale—between £30 million and £50 million a year—but it has been the general view in local authority financial circles that the Public Works Loan Board rate of interest has been considerably above the market rate for local authorities of good standing. Not only has it not followed the rate of interest at which local authorities of good standing should obtain money, but it has led the way to forcing up the rate of interest. The Government for the past eight years have been able to borrow at the Government rate of interest and lend it back to local authorities at a higher rate of interest than would have been the local authority rate had the Government not increased, arbitrarily, on many occasions, the rate of interest charged by the Public Works Loan Board. That is not my expression of opinion; it is the opinion which has been put to the Government on many occasions by the Local Authorities Standing Joint Committee, which considers and discusses the various aspects of it with the Government from time to time on behalf of the local authorities.
We are now told by the Minister that it would not be possible to revert completely to the 1955 position because £1,000 million a year would be a sum virtually impossible for the Government

to borrow on the market without completely upsetting the whole of the credit arrangements. This is a point that I cannot understand. In effect, as I see it, the Minister is saying that 1,800 borough and district council treasurers can more efficiently raise £1,000 million a year in the market than can the Government broker and the Treasury.
This is a situation which is rather farcical. One thousand million pounds has to be borrowed from somewhere, on the Minister's own figure, for new capital expenditure and reborrowing on various items which fall due for repayment. If £1,000 million has to be borrowed, theoretically I should have thought it easier for one borrower to obtain it and lend it out at a small charge for the service rather than 1,800 separate local authorities. We will presumably be in the position with the new arrangements with the Public Works Loan Board that 1,800 local authority treasurers will borrow next year £200 million less on the market and the Treasury will borrow £200 million more at, we hope, a slightly lower rate of interest, thus saving the local authorities a certain amount on interest charges.
I cannot accept the Minister's charge that the needs of central and local government are not identical. I would have thought that the needs would have been about the same in both cases, in other words, to keep interest charges for local authorities capital work at the lowest possible level. I was surprised to hear the Minister refer to the new contemporary shape for local authority borrowing which I can only assume to mean that the new contemporary modernisation ideas of the present Conservative Government are to put more controls on the way in which local authorities can borrow money. This is a magnificent reversal from the grand battle cry of 1951, "Set the people free", if we are now to go back on what was done in 1955 and reimpose controls on local authorities.
I disagree slightly with the figures given by my hon. Friend the Member for Sowerby. The Minister told us that some 300 out of 1,800 local authorities at present hold more than 20 per cent. of their total outstanding capital in short-term money repayable in twelve months or less.


According to the White Paper, this sum of money is something over £1,200 million. As far as I can see from the various statistics that were published, the local authorities debt outstanding at present is about £6,000 million in England and Wales and £800 million in Scotland.
If my arithmetic is correct, 20 per cent. of that means that after a given date which the Government intend to introduce if all local authorities took full advantage and borrowed or held 20 per cent. of their money on short-term the total amount of short-term money would increase from £1,200 million to about £1,360 million. My calculations show that the present holding of short-term money taken over all local authorities is about 19 per cent., and it may be increased under the arrangements which the Government are now suggesting up to 20 per cent., which is £1,360 million.

Mr. Maurice Macmillan: Fifteen per cent.

Mr. Reynolds: The Minister obviously has more up-to-date statistics than I have. The published ones which I have are about twelve months old. In fact, that reinforces my argument. There could be an increase of something like £400 million a year up to £1,600 million from the present level of short-term money of £1,200 million. I suggest that the Government White Paper will encourage over the next two years a quite considerable increase in the amount of local authority short-term money.
We know that some authorities, Leeds, has something over 50 per cent. of its capital debt in short-term money, Reading, nearly 80 per cent. in the very enterprising policy which they have been following there, which I would have thought a little risky, but nevertheless they have obtained their money on short-term borrowing of less than twelve months. Many of these authorities—300 of them according to the Minister—are to be given four years to get down to the 20 per cent. level. Presumably the regulations will provide by what proportion they have to go down each year, or something to that effect. Nevertheless, they have four years to get down to it.
But there are 1,500 at present, or at the time of publication of the White Paper, and the position has altered a lot since then, with less than 20 per cent. of their capital requirements being met by loans over a period of twelve months or less. Many of these authorities are quite small ones and would not in any event go in for short-term borrowing. On the other hand, their capital requirements are very small as well, and that sort of local authority is satisfied by borrowing some £50,000 from the Public Works Loan Board, which would probably cover two years of its capital expenditure. In working out these figures, borrowing by such authorities does not play a very large part in arriving at the total. Others, however, of these authorities are large ones with a considerable amount of capital, and some medium sized ones have several millions of capital outstanding, and up to the present they have been holding in some cases 4 per cent., 5 per cent., 6 per cent., 10 per cent., of their money on periods of loan of less than 12 months.
Now the Government White Paper has laid it down quite clearly that it is perfectly respectable, finance-wise, to hold up to 20 per cent. of one's capital in short-term money. There have been many, during the last month or two, since the publication of the White Paper, small and medium sized authorities, which up to now have been acting very conservatively in this respect, which have increased their holdings of short-term money because the Government have produced a White Paper which says that 20 per cent. is all right. So I am absolutely convinced that, at any rate over the next two years far from a downward move, those authorities with less than 20 per cent. at the moment will gradually—because a large number of authorities have kept well below 20 per cent. mark—be encouraged by the fact that this 20 per cent. is one which has been given a certain aura of respectability and will be likely to increase their holdings quite considerably and thus increase the figure of some £1,200 million.
I really cannot understand why the Government have allowed this to happen. If they are concerned with the amount of hot money which is


included in this sum, if they are concerned about the possible effects on the economy as a whole of this type of activity, why have they taken the action which will increase the amount of hot money which local authorities have got during the next 12 to 18 months. In fact, the proposals in the White Paper itself will not reduce the amount of short-term money very largely. As I have already explained, some authorities will have to reduce their holdings, others will increase them but in fact the total local authority capital expenditure will go up by at least £600 million per year in the foreseeable future, and for every year, if one allows a little bit for capital repayments, they will be able to add 20 per cent., or about £100 million a year, of short-term debt which they carry, and the permissible figure will increase by some £100 million per year, so that in four or five years' time we shall be in the position that the total amount of short-term money held by local authorities will exceed that which they hold at the present time.
This is not what one reads in the White Paper, but, as I explained a moment or two ago, it is what one reads in the Minister's remark, because he said the time had come to limit the rate of growth. I think it is generally recognised, as it is by financial journalists connected with local government, that the rate of growth over the last few years has been fast but indications are that it is now slowing down.
So far as this aspect of the Government's proposals is concerned, many local authorities will now begin to take a greater interest, and because the total amount which can be held on short term automatically increases every year, I cannot see that it will have any great effect in putting the Government in a less vulnerable position in relation to the total amount of hot money.
I should like to know a little more about the actual position. We are told that local authorities have got some £1,200 million on short-term loan. I understand from the inquiries I have made that probably 75 per cent. or 80 per cent. of this money originates in the first place from sources outside this country. But I think that as the main reason for this action being taken is the amount of hot money involved we really

ought to be given a few estimates from the Treasury Bench as to exactly how much is involved. My information is from purely private sources involved in lending this money to local authorities. We ought to be told how much of it is considered to be in that form; we ought to be given some sort of definition; we ought to have some idea of what the definition is as well, because it will make a difference to the answer. But how much of it is hot money?
Local authorities are warned off this type of money. This is what always happens when the Government are composed of hon. Gentlemen opposite, for they only control the public sector. What proportion of money of this kind is borrowed by local authorities? Who else is getting it? How much is going into private industry? I have not the faintest idea, but as this is the case for introducing this type of control, I think the House should be given more information as to what caused the Government to take this action, and whether the Government themselves have got some of this money, as well as the local authorities. I would not claim to be an expert in how central Government finance is curried on, but it would not surprise me if the Government had even more hot money than local authorities, but the local authorities cannot control the Government whereas the Government can control the local authorities, and so the local authorities get the worst end of the stick whichever way it goes.
I should like to say a word or two about the money which local authorities will soon be able to obtain from the Public Works Loan Board. I understand that the Minister has told them that as from next year they will be able to get some 20 per cent. of their total capital requirements going up each year. I make a special plea for one particular type of capital requirement of local authorities. We have been told ever since hon. Gentlemen opposite have been in power that they want a property-owning democracy, that they want to encourage owner-occupation. Ever since, they have been forcing up the rate of interest charged to the local authorities on mortgages from 3¼ per cent. to 6½ per cent. and by building societies from 4½ per cent. to 6½ per


cent. It is rather a queer way of encouraging a property-owning democracy, but nevertheless this is how hon. Members have encouraged owner-occupation and the purchase of houses. Local authorities have been forced to borrow money on the market for the purpose of making advances under the Small Dwellings Acquisition Act, and the Housing Act, 1949.
Many of them over the last few years have been forced to curtail their activities, and for a comparatively simple reason—if a local authority borrows money from the Public Works Loan Board to lend to prospective owner-occupiers under the Small Dwellings Acquisition Act and the Housing Act, 1949, even though the interest rate is high, they cannot lose. Because if the rate of interest is later reduced then the person with the mortgage can go to a building society, reborrow at a lower rate and repay the local authority. The local authority which has borrowed from the Public Works Loan Board in the first place can then give notice to the Board and repay the money so that the local authority suffers no financial loss.
But if the local authority makes advances from money it is forced to borrow from the market on 10-year or 15-year mortgages, or whatever is the current best period of years, and then lends at ¼ per cent. above the figure at which it borrowed, then the rate of interest will be above 6½ per cent. Then if the rate of interest falls and people reborrow and repay the local authority it cannot then repay the money but must hold on to 6½ per cent. money.
I have no doubt whatsoever that a local authority which wanted to borrow money at that particular time probably got it at rather less than 4½ per cent. Nevertheless, if a local authority operates on a 15-year loan from an insurance company or a merchant bank or some other organisation, it must keep the money while paying a higher rate of interest than it should have been able to borrow at. If the Government wish to encourage owner-occupation, and if they are relaxing borrowing conditions for local authorities, then they should allow local authorities to borrow as much as they wish from the Public Works Loan Board for making allowances under the

1959 Act and the Small Dwellings Acquisition Act.
According to calculations made in local government circles on the basis of the White Paper, the Government will probably charge about 5 per cent. for long-term loans by the Board. Borrowing at that rate of interest would enable local authorities to lend money to owner-occupiers at about 5¼ per cent. which is rather less than the figure of 6 per cent. or 6¼ per cent. or even higher that they are having to pay now to building societies and, indeed, to local authorities.
If the Minister wishes to help owner-occupiers and those building their own houses, here is his opportunity. I know that I can speak here on behalf of the Acton Borough Council—I am chairman of its Finance Committee—and I believe that it represents the views of many others as well. That council would be only too pleased to wipe out all restrictions on borrowing for owner-occupation if it could get sufficient money from the Public Works Loan Board at no risk to local ratepayers.
I believe that it would be possible, without undue strain on the Exchequer, to allow local authorities, in addition to the 20 per cent. they will be allowed to take up—if they so desire—from the Board next year, to allow them to take as much as they need for assisting owner-occupation. This would be a demonstration of genuine interest by the Government in owner-occupation.
Since 1951 the Government have made it financially more and more difficult for people to buy their own homes. Through this Bill, there has been a somersault in the relations between local government and the central Government over the borrowing of money. I hope that we can have an even bigger somersault and get a Government which will assist owner-occupation in a way that will compare favourably with this present Government's past policy of making it more difficult.

8.23 p.m.

Mr. William Hannan: My hon. Friend the Member for Islington, North (Mr. Reynolds) has made some of the points to which I intended to refer and, therefore, it will probably relieve the House to know that I shall curtail my remarks. The hon. and learned Member for Antrim, South


(Sir Knox Cunningham) referred—andNorthern Ireland is to be congratulated on this—to signs of attention to Northern Ireland in the Bill. I do not regret that, but I hope that the Minister will explain paragraph 13 of the White Paper, which says:
The proposed limit on total temporary borrowing is higher than that at present in force in Scotland under section 260 of the Local Government (Scotland) Act 1947.
This being so, the White Paper goes on to say that there are no grounds now for maintaining the former favourable situation which Scotland enjoyed. This comes as a disappointment and surprise to Scotland. Why should the Government take this view?
The Government profess to be paying particular attention to Scotland at the moment. Their usual practice, however, is to allow interest rates and unemployment figures to creep up and then reduce them again, but by not quite as much as they have gone up. They then preen themselves on securing an improvement. What are the grounds for the previous arrangements for borrowing not being maintained? Circumstances in Scotland have not improved to such an extent that this can be justified.
The White Paper itself shows up the contradictions and difficulties in the Government's position. In paragraph 5 there is a reference to
…the rising cost of short-term borrowing has not held demand in check because the only alternative for local authorities has been to commit themselves for a longer term at rates which were generally even higher".
Apparently the Government have tumbled to the fact that local authorities are trying to find ways and means of overcoming the difficulties which the Government themselves have placed in their way for many years. The Government have realised at last that short-term borrowing is difficult and that local authorities are preferring longer-term borrowing. The result is that the three months' period is out and short-term borrowing is to be interpreted as meaning 12 months. If it allows past conditions to continue, then the Government must resort to such methods.
Paragraph 6, however, contradicts paragraph 5. It says:
…the development of a local authority temporary borrowing market has meant the growth of a large volume of short-term debt that is insensitive to interest rate policy.

Here is the evidence that the Government's methods have failed to deal with the problem of short-term borrowing and that high interest rates have had no effect. But, as has been indicated, we are not now just going back to pre-1955 days, for the Minister is talking about a possible compromise. Since 1955, the Government have failed completely in their policy of putting local authorities on to the open market for money borrowing.
Hon. Members, especially those from Scotland, will recall that in December, 1955, some of us put questions to the then Chancellor of the Exchequer, now the Foreign Secretary, about the failure of the Glasgow Corporation loan. The Corporation had been forced to go to the market for a loan of £5 million, but it had been a complete flop and the underwriters had had to accept 97 per cent. of it. Glasgow's humiliating experience only made it more difficult for smaller authorities to go to the market, and it also meant that exorbitant rates of interest were demanded by the market to finance the serious work of local authorities and help them discharge their statutory duties.
The White Paper also makes it clear that the Bill is to bring local authorities into line so that they have to have regard to national considerations and not act indiscriminately out with Government policy. This, too, is something new. Whet all local authorities had free access to the Public Works Loan Board for their borrowing needs, in 1955, an election was looming. We can all recall the promises which were then made and the give-away Budget of 1955. But immediately after the election there came the restrictions on expenditure by local authorities and other public bodies. Despite all the promises and the flamboyant policies offered to the electorate, this action is now suggested in the White Paper.
The most important aspect of financing house building, the problem which bedevils local authorities and relations between the Government and the local authorities and between the authorities and tenants or owner-occupiers, is that of the rate of interests. The Government have made it clear that the Bank Rate is their principal instrument for


managing the economy. Their use of this one instrument has led to the policy of stop and go and the Government have landed themselves in repeated contradictions over the past 12 years because of it.
For local authorities the rate of interest is even more important than subsidies. Moreover, it is precisely this factor which creates confusion and indecision in their planning. Consequently, if in their priorities and budgets they are subjected to the vagaries and uncertainties of Government policy, it is no wonder that we have the conflict which is partly responsible for the present rating position, which the Government are now trying to rectify by the introduction of another Bill.
In proof of what I am saying, since 1951 there have been no fewer than 23 changes in the rate of interest charged by the Public Works Loan Board. These have varied from 3½ per cent., as we left it, to 7 per cent. and 8 per cent., and are now around 5 or 6 per cent., despite local difficulties. The Government have now taken so much from Labour's policy that they should go a little further. Having accepted planning, they ought to use planning in financing local authority and other projects.
For example, in 1961, Glasgow Corportion completed 16 three-apartment houses. The estimated cost of each house was £2,200, made up of labour, materials, land, roads, sewers and professional fees. The repayment of the capital alone over 60 years cost 14s. 1d. per week, but to repay capital plus interest at 5 per cent. meant a repayment of 44s. 8d. a week. That meant that 30s. 7d. was paid in interest every week in respect of each house. How can the Government justify that wicked method of dealing with an urgent problem? To put it another way, the capital and interest over 60 years on a house costing £2,200 amounts to £6,973, which is three times the initial cost of the house itself. If the rate of interest was reduced by even 1per cent., over a period of 60 years it would make a difference of 7s. 3d. per week.
The Government ought to consider this problem in their own interests, because it is here that trouble arises between local authorities, tenants and

owner-occupiers. It is because people have to pay extortionate rates of interest that we continually run into rating difficulties. If the Government want to commit political suicide, who am I to say them nay, but it means that local authorities, tenants and owner-occupiers are having to suffer because of the indecision of the Government and because of the varying rates of interest charged year by year. The present state of affairs prevents people from planning for the future, and is harmful to the economic welfare of the nation.

8.36 p.m.

Mr. Bruce Millan (Glasgow, Craig-ton): I thought that when the Economic Secretary was introducing the Bill, he was rather reticent about the fundamental considerations which had led to the need for it. The White Paper is the most devastating criticism that it is possible to make of the Government's policy of using the monetary instrument as the Government's main weapon of economic policy during the last eight to 10 years.
In 1955 the Government forced local authorities away from the Public Works Loan Board on to the market in an attempt to instil financial discipline into local authority borrowing. We are told in the White Paper that the Government have recently carried out a review of that policy, and have come to the conclusion that it ought to be changed. In fact, there is nothing in the White Paper that was not said in the Radcliffe Committee Report in August, 1959. All the disadvantages of denying local authorities access to the P.W.L.B. were set out in full in that Report.
The basic criticism made by the Radcliffe Committee was that there was no need for the Government, whatever they might have been doing in the economy as a whole, to use the monetary instrument to control local authority borrowing. The Government already have control over local authority borrowing in two ways. First, because a local authority cannot borrow money without getting loan sanction from the Government. Secondly, because most of the capital expenditure incurred by local authorities is the result not so much of local authority policy but, rather, the result of the application by local authorities of national Government


policy. The Government therefore have all the control they need over local authority borrowing.
The reason given in October, 1955, for forcing local authorities on to the market was therefore a completely pointless one. The various disadvantages that the Radcliffe Report warned might flow from that policy have eventuated. The White Paper simply says what Radcliffe said about four years ago. There has naturally been a tendency for local authorities to indulge in a considerable amount of temporary borrowing, because in a period of high interest rates local authorities, in trying to protect their ratepayers, have been reluctant to fund their borrowing. Temporary borrowing, whatever the other disadvantages have been, from their point of view has at least given local authorities the opportunity of paying lower rates of interest.
As the Economic Secretary pointed out, the growth of temporary borrowing has been very marked since 1955. It has risen sevenfold since the new policy was introduced, and it has been rising particularly rapidly over the last two or three years, as the local authorities' need for funds to finance their increasing capital expenditure has risen.
As the Economic Secretary also recognised—and this is also a confession of error in Government policy—from the national point of view this is an extremely undesirable and insecure way of financing local government borrowing. For example, there has been a considerable attraction of foreign funds, although it is difficult to discover how much of the money that local authorities have been borrowing has come from abroad, and how much is hot money. I hope that the Economic Secretary will answer the question raised by my hon. Friend the Member for Islington, North (Mr. Reynolds).
One of the criticisms made in the Radcliffe Report was that there was not sufficient statistical information available about local authority borrowing and, for that matter, that there was a general dearth of financial statistics. We hope that that has to some extent been put right in the last four years, and that the Economic Secretary will be able to give us more information this evening.
Hon. Members on this side of the House naturally welcome the Government's proposal to allow local authorities to have readier access to borrowing from the Public Works Loan Board—20 per cent. in the first year, rising over a period of four years to a total of 50 per cent. We would like to see access to the Public Works Loan Board liberalised even further. There is an interesting comparison between the gradual change which the Government are now making for a more liberal use of the Public Works Loan Board and what happened in 1955. When the boot was on the other foot and it was a question of the Government's seriously inconveniencing local authorities, there vas no gradual transition to the new policy; it was put into operation virtually overnight. The disastrous attempt of Glasgow Corporation to float a large stock issue took place in December, 1955, only two months after the change of Government policy in October of that year What happened in Glasgow was repeated, although perhaps not in such a spectacular fashion, with other local authorities.
One of the effects of Government policy introduced n 1955 was to place further difficulties in the way of local authorities—which difficulties have continued over the last eight years—in the process of raising money for their essential purposes. Those purposes are essential, as the hon. and learned Member for Antrim, South (Sir Knox Cunningham) reminded us with reference to Northern Ireland. The kind of schemes that local authorities are financing are schemes of housing, education, roads and the like, which the Government themselves have admitted to be essential by in the first place giving them sanction to borrow the money.
Apart from increased access to the P.W.L.B., which we certainly welcome and should like to see extended, the Government are now proposing that there should be limits put on the level of temporary borrowing. It is worth pointing out that these limits have always operated in Scotland. The limit for temporary borrowing at 15 per cent. of the total loan debt provided for in the Local Government (Scotland) Act, 1947 was rather more stringent than the new limit which the Government are now introducing for Scotland as well as for England and


Wales. Over the last eight years Scotland has suffered from two different points of view. It has been prevented from getting access to the Public Works Loan Board and has not had the same facilities for temporary borrowing as local authorities in England and Wales have had.
It is still an open question as to what the actual effect of the Government's new proposals will be on the level of temporary borrowing. The extremely interesting analysis given by my hon. Friend the Member for Islington, North of what he considered the effect would be of the next two years, requires an answer from the Economic Secretary. There is a certain conflict of interest here. Obviously, from the Government's point of view, the point of view of national policy and monetary management, it is important that the level of temporary borrowing should be reduced, or at least that it should not continue to increase.
We on this side of the House will accept that, but it is not such an obvious bargain from the point of view of the local authority which by the insecure method of increasing its temporary borrowing as a proportion of its total borrowing has thereby managed to obtain lower rates of interest than it would be forced to pay on the market for longer-term borrowing.
While we would accept in principle that it is right that some attempt should be made to put a limit on the total level of temporary borrowing, I do not think we can give an unreserved welcome to this part of the Government's proposals unless they are able to give us some satisfaction about the rates of interest which local authorities will have to pay when in future they go to the Public Works Loan Board. This is something about which the Economic Secretary said absolutely nothing, but it is basic from the point of view of local government finance.
It is basic also in a much wider sphere. The Government's attempt to use the monetary instrument as one of its main instruments of economic policy has not only, as my hon. Friend the Member for Glasgow, Maryhill (Mr. Hannan) pointed out, created a considerable amount of uncertainty, because

the P.W.L.B. rates of interest have changed nearly 40 times since November, 1951, whereas in the six years of Labour Government they changed only twice. It has not only created uncertainty but very much added to the cost of all kinds of borrowing.
Quite apart from the increased cost of local authority borrowing, it is worth making the point that as long as the Government continue to have a high interest rate policy, they are suffering financial disadvantages in the financing of the national debt. For example, between 1951 and 1962 the national debt increased by about 11 per cent., but in the same period the total interest paid on the national debt—and this comes out of the taxpayers'pockets—rose by nearly twice. This is not a question of a few million pounds or even £100 million; the increased cost of Government financing because of their high interest rate policy was £400 million, comparing 1962 with 1951. From every point of view I wonder why the Government persist in attempting to run the economy—and not even successfully—at these high rates of interest.
The burden on the local authorities is similarly increased. One of the arguments of Government spokesmen when this has been drawn to their attention has always been that one has to consider not just the rate of borrowing by local authorities in any year but the broad picture, adding the particular year's rate of borrowing to the total borrowing of local authorities so that the high rate of interest currently being paid did not make much difference. But these small differences in average rates of interest in one year after another eventually have a considerable cumulative effect.
The average rate of interest which Scottish local authorities paid for all their borrowing—not just that over the current year—in 1950–51 was 3 per cent. whereas in 1961–62 it had risen to 5 per cent. These figures come from an Answer given by the Secretary of State this afternoon. The additional burden on local authorities because of these higher interest rates amounted to no less than £17 million in 1961–62. The figures for England and Wales must approach £200 million. If the Government are concerned with improving the


prospect of local authorities and giving them some financial relief, the simplest and most fundamental step would be to reduce the rates of interest on sums loaned to local authorities.
It is in that context that we must consider the new Government proposals and, in particular, the additional access which is to be allowed to the Public Works Loan Board. If this simply means that local authorities will have to restrict their temporary borrowing and to go to the Public Works Loan Board at the current rate of interest, then I doubt whether local authorities, taken as a whole, will get any financial advantage at all from the Government's proposals, certainly in respect of interest payments.
My hon. Friend the Member for Islington, North pointed out in his interesting speech that the rates being charged at present by the Public Works Loan Board for borrowing are higher than the rates which are available to local authorities of good standing for loans of a comparable period in the open market. This follows from what the Government have been doing with the Public Works Loan Board since 1955, because the Government have been placing the Board's loans at rates which would be equivalent to those which authorities having to resort to the Board would have to pay in the open market. Since the Board has been a lender only of last resort and larger local authorities and those of good financial standing have not been borrowing from the Board, by definition the rates of interest which the Board currently charges are higher than those which would have to be paid by local authorities of good standing in the open market.
With the Government's change of policy, local authorities of good financial standing will come for part of their requirements to the Board. It seems to follow, even from the Government's policy, apart from it being desirable in itself, that the rates of interest currently being charged by the Board will be too high in the new circumstances. The current rate is 5¾ per cent. One would expect the new rate to be significantly lower.
I hope that the Economic Secretary will make an announcement about this and will be able to assure us tonight that the Board's new rate of interest will be

lower than the rates which are currently charged. If they are not, I repeat that there will be very little advantage, at any rate from the interest point of view, to local authorities in the new arrangements, even if they welcome the more liberal access which they are to have to the Board.
On the whole, therefore, although we welcome the Bill, we have some reservations about it. It does not come anywhere near solving the fundamental problems of local authority finance. I do not believe that these can be solved without a fundamental review of the whole structure of the rating system and local authority finance generally. So far as it goes, the Bill is on the whole welcome, but it merely puts right something that need never have happened. It merely remedies the disastrous effect of the Government's action in 1955 of following the doctrinaire philosophy that local authorities should be subject to the financial disciplines of the free market. We did no; accept that in 1955. Our view on this was vindicated by the Radcliffe Report in 1959. We welcome the Government's conversion to our view, however belated it has been, and the introduction of the Bill.

Notice taken that 40 Members were not present;

House counted, and, 40 Members being present—

9.0 p.m.

Mr. Maurice Macmillan: By leave of the House; I am grateful to have this opportunity to reply to some of the points that have been made during the debate, despite the efforts of the hon. Member for Islington, North (Mr. Reynolds). It has been an interesting debate and we have had an interesting series of discussions on both the White Paper—

Mr. George Lawson: On a point of order. Are we to take it that the hon. Member is objecting to the fact that my hon. Friend drew attention to the me agre attendance in the House?

Mr. Deputy-Speaker (Sir Robert Grimston): That is not a point of order.

Mr. Macmillan: I was not objecting to that. I was expressing my gratitude that the end result had not prevented our proceedings from being concluded.
As I was saying, we have had an interesting series of discussions on the White Paper, the Bill, and on the problems of local government finance. We have also at intervals discussed interest rate policy generally.
I would like to begin by correcting several points of fact about which some hon. Members seem to have become confused. The hon. Member for Sowerby (Mr. Houghton) referred to the temporary borrowing figure as being 25 per cent. As defined in the White Paper, the temporary borrowing proportion is 15 per cent. and not 25 per cent. The 25 per cent. figure is the sum of temporary borrowing plus long-term debt within one year of maturity. This latter proportion is not being limited in the arrangement set out in the White Paper.
My hon. and learned Friend the Member for Antrim, South (Sir Knox Cunningham) welcomed the Bill in that it would, he hoped, provide some assistance to the special problems of Northern Ireland. I am glad that he made that point. Fears were expressed by the hon. Member for Glasgow, Maryhill (Mr. Hannan) that the limit on temporary borrowing would discriminate unfairly against Scotland. In fact, it removes the discrimination that now exists in that the limit at the moment on temporary borrowing by Scottish local authorities is 15 per cent. and it will become 20 per cent., in parallel with England and Wales.
There is always apt to be a conflict of interest as between local and national government and the share of the financial burdens of Government expenditure as between the ratepayer and taxpayer. In suggesting that the previsions we have been discussing were a solution that attempted to find a compromise to this conflict, I was not suggesting that there had been serious disagreement or that either of the parties concerned were to blame. The hon. Member for Islington, North deplored the fact that I appeared to blame the local authorities. I had no intention of doing that, and, if I did, I apologise.
There is no blame attached at all to this situation, but that does not mean to say that it is not the responsibility of the central Government to remedy it

once it has arisen. I should like to make that quite clear. Nor is it a reasonable criticism to blame the central Government on a matter of dogma. The situation in 1955 was one which in the judgment of the then Government required the local authorities to go to the market and not have any longer exclusive reliance, at any time they wanted and in any amount they wanted, on the Public Works Loan Board.
Meanwhile, the situation was changing, as situations particularly today do change. In 1959 the Radcliffe Report warned of the dangers of this and the difficulties which it was likely to bring and it proposed that we should go back to the 1955 situation. In the course of debates the Government took note of the warning and expressed the view that this was a real danger, but that the situation was not yet such as to require Government action and therefore what was happening would be kept under review and inquiries and investigations would be made. Now the situation has changed again, and since 1959 it has led to the view that it is necessary to make these limitations on short-term local authority borrowing. This was not returning by any means to the pre-1955 position when local authorities were not able in practice to borrow short-term, but it was a return, as I have said, to a mean, so to speak, between the two previous situations.
I do not think that this is at all a subject for a doctrinaire approach. This is much more a question of technical control and of a method of managing the monetary side of our economy. A great deal of the argument, apart from some of the questions which were asked, turned on the interest-rates policy in general terms rather than on the particular provisions of the White Paper or the Bill. The argument which was put forward was answered by my right hon. Friend the Chancellor of the Exchequer, who was quoted in the debate, when he said that in the matter of differential rates of interest for local authorities for housing or other purposes the Government preferred to deal directly, rather than indirectly, with the subsidy that this implied. I do not think that I have much to add to that statement. Whatever one may say, either the arguments put forward from the benches opposite were a plea for a cheap money


policy or they were a plea for a subsidy to local authorities by means of differential rates of interest.
The hon. Member for Sowerby asked me some specific questions on the comparative cost of borrowing and on hot money. First, on the hot money side; the money from overseas is only one of the reasons for these measures. The implication during part of the debate was that this was the main and indeed the only reason impelling the Government to take this course. One of the difficulties is that it is not possible to know in advance or at the time exactly what foreign money is coming to local authorities. This is the real problem. There is no method of knowing it except retrospectively and even then only with extreme difficulty.
I cannot give this evening the quantity or the nature of the foreign money. We know that at the end of June, 1963, loans by foreign banks to local authorities totalled £160 million. But this, of course, is only part of the picture. I have no figures available for loans of foreign money coming through English banks and other English intermediaries.
As to the comparative costs of borrowing, the current seven-day rate is 4⅛ per cent. The current three-month rate is 4⅜ per cent., and the current 364-day rate is 5 per cent. I think that there has been a little confusion about the Public Works Loan Board rates. The current rate for all periods is 5¾ per cent., and this is the rate which at the moment, would be available for local authorities borrowing above the quota. The quota borrowing, so to speak, would be at the Government credit rate, and this is calculated by reference to what it costs the Government to borrow for a comparable period; it is calculated from the yields of Government stocks, and the expenses incurred by the Government are covered by rounding up the yields to the nearest ⅛ per cent. There is no constant differential between the Government credit rate and the local authority market rate. It usually runs to a figure of about ¼ per cent., but it has ranged during the past year or so between nothing and ¾ per cent. I appreciate that this is a slightly incomplete argument at the moment, and I shall come later to some of the argu-

ments raised by the hon. Member for Glasgow, Craigton (Mr. Millan).
It is true that local authorities which have been relying very heavily on temporary borrowing will have to pay more for some of their money. The money which they have previously borrowed short and will in future have to borrow long will cost them more. They will save money on some of their long-term borrowing, by and large, through the Public Works Loan Board, and over the full transition period, of course, this can be up to 50 per cent. of their total borrowing. There will, in fact, be a balance, and the local authority with the heavy short-term debt will have to pay a bit more on balance, but no more than those which are already borrowing long. The authorities which are already borrowing long will be better off under the new arrangement, and, I remind the House again, these are the great majority of the local authorities.
The hon. Member for Islington, North seemed to think that there was some disagreement between myself and the White Paper as to the object of these measures. This is not so. I was trying to express, in a rather moderate way, what we were claiming for them. I took the point, which was made in the debate, that the total amount of short-term borrowing may not be reduced initially, and, indeed, as the whole amount of local authority borrowing extends, it may well rise; but this is precisely the point I tried to make earlier in explaining why the Government thought it right to take early action now rather than take panic measures when the situation became really difficult. Hon. Members appreciate that we do not really know what is the hot money situation and how it will develop, and indeed it is not possible to know.
This is why we have set the limit of 20 per cent. We have given four years for the local authorities to get to it. The method of doing it has not been laid down and is a matter for adjustment between the local authorities and the Government So far, I think, it is being left more or less to them, but, of course, it will be expected that they will show a proportionate increase in the cost of borrowing according to the total size of their short-term borrowings. It is the uncertainty in the situation, to which the


hon. Gentleman referred, which has led to the setting of a percentage limit, which, of course, reduces the vulnerability of the Government; it depends not so much on the absolute amount of the debt but on a proportion, as he knows.

Mr. Reynolds: It is precisely the uncertainty to which the hon. Gentleman is referring which reinforces my argument. If there is not to be included in regulations actual steps or stages through which local authorities with more than 20 per cent. have to go to reach the 20 per cent., then, because of the uncertainty of the political situation, they will be unlikely to take any action to reduce their short-term holdings at least until after the General Election. In fact, there will be a greater increase in the total amount than I foretold.

Mr. Macmillan: I think that that is a rather improbable argument, begging several questions. Local authorities with any significant holdings of short-term money which might be dangerous are comparatively few. The total number of authorities above the proposed limit already is only 300. I do not think that the relationships between the Ministries and the local authorities are so strained as not to be able to cope with the rate of scaling down of those authoties which have very large short-term borrowing, and without composing a complete set of regulations which might be difficult for some of the individual authorities. I think that that can be left to the good sense and co-operation of the officials concerned.
The force of the hon. Member's argument would be more apparent were he to give a hint or undertaking as to whether, if the party opposite were to win the General Election, they would repeal the Bill. I think that we can leave that point and go on to the other point made by the hon. Member, namely, that the Public Works Loan Board has led instead of followed the local authority market rate. I do not think that this is so. The Public Works Loan Board rates have been calculated with strict regard to the rate paid by local authorities on the market. I agree that it is sometimes argued that this creates a vicious circle and that the Board's rate acts, so to speak, as a floor to the market rates. But this argu-

ment is not susceptible of proof because fundamentally it is an argument as to which comes first—the chicken or the egg—and I do not think that I can give the hon. Gentleman any information which would help him in it.
The question of owner-occupation has been raised. I think that I am summarising the point fairly in this way: if the Government cannot allow unrestricted access to the Public Works Loan Board, why cannot they allow access to owner-occupiers under the appropriate Acts over and above the quota? This would not be possible simply because it would add about £100 million a year, which certainly, in the beginning, is a significant proportion of the total amount for which local authorities can go to the Board at the Government borrowing rate. It is half the first year's quota, so to speak. The whole idea would be inconsistent with the desire to keep the calls of local authorities on the Board within prescribed limits. It would probably, in any case, have to be at the expense of loans by the Board for other purposes and, in view of the fact that proportionately to local authority borrowing the total of loans for these purposes is very small, it is better to leave the local authorities concerned to make use of their Public Works Loan Board quota for these purposes among others. The proportion is about 100 to 1,000 million.
The hon. Member for Glasgow, Maryhill was concerned about interest rates. I think that one of his main points was that he was against the local authorities going to the market. I shall have something to say, I hope, about his argument later. The debate turned back, so to speak, on the question of subsidised and low interest rates. Naturally, I do not agree with the contention of the hon. Member for Craigton that the White Paper is a devastating criticism of the Government's policy. As I explained at the beginning of my reply, I do not regard this as going back to 1955 as has been suggested, or to the Radcliffe Report. As we hinted in 1959, the position created in 1955 is no longer suitable to the conditions, which have changed a great deal since then. This is not in any way attempting to attach blame to the local authorities but is a recognition of a


de facto situation, which the hon. Member agreed had to be dealt with.
The argument which has been behind all this is that the interest rates are too high. I will not go into the dangers and difficulties of trying to run a cheap money policy when world interest rates are high. I point out in passing that the cost in interest to the Government of borrowing money is returned to the taxpayer by way of interest on the investment in his savings, which produce loans for the Government. It is not as if the taxpayer had no return directly and indirectly from the interest on gilt-edged. That can be seen in the immense rise in savings over the last few years. The hon. Member's analysis of what might happen was a little theoretical and appeared to ignore the fact that a great deal of it was purely speculative and making a number of assumptions which might or might not come about.
As to interest rates in general, over the last 10 years long-term interest rates have risen throughout the world. This reflects the world-wide pressure of demand for capital for all forms of investment. In this country, as in most other countries of sophisticated economies, the capital market has been progressively freed of restrictions on borrowers and lenders of funds capable of investment.
This enhanced freedom of capital to move in response to demand means that the price of capital—the rate of interest—is bound to be subject, first and foremost, to the normal play of supply and demand in the market. The Government have, of course, considerable influence on the long-term rate of interest and are by no means indifferent to the rate prevailing at any one time. However, the experience certainly of the party opposite should have provided a warning against trying to hold long-term interest rates at a lower level than the market rate and the difficulties that a policy of that nature builds up for itself over a period of years.
In the most favourable circumstances, the ability of any Government to control the long-term interest rates is limited by factors of a technical nature as well as by policy. It is essential that budgetary and monetary policy should complement each other. Each impose certain limitations on what can be done in the market

to influence the long-term rate. The free character of the market reflects the choice which is open to investors. No Government could force the public to hold securities on which the yield was considered to be too low.
Despite the higher interest rates, the Government credit rates will, on the whole, be favourable for the local authorities compared with the market long-term rate. Secondly, there is a point which underlies some of the doubts expressed about the difference between the two rates. If hon. Members are worried about the recent fall in gilt-edged market prices, with the consequent rise in the Government credit rate, it is fair to say that at a time when the economy is expanding an adjustment in investors' preferences and in the yield relationships between equities and gilt-edged is only to be expected. There is no question of the Government either approving or disapproving adjustments of that kind and they certainly have no long-term results on the economy. We shall doubtless return to some of these major problems of interest rate policy, particularly low rates for local authorities, when we come to discuss the details of the Bill.
All that I can do this evening is to sum up the provisions contained in the White Paper and in the Bill. We are imposing a limit on the extent to which local authorities may borrow short-term, and we are extending their capacity over a period to go to the Public Works Loan Board at Government credit rates for up to 50 per cent. of their total long-term requirements. The Public Works Loan Board remains as the final underwriting cushion, so to speak, for local authorities in the last resort no matter from what source their loans may have been obtained.

Mr. Houghton: Will the hon. Gentleman answer the question put to him by my hon. Friend the Member for Glasgow, Craigton (Mr. Millan)? What is the rate of interest to be charged by the Public Works Loan Board? Is it to be lower than the present figure?

Mr. Macmillan: I thought I had explained that. The rate of interest which is quoted and which was 5¾ is not the Government rate.

Mr. E. G. Willis: What is the Government rate?

Mr. Macmillan: The Government rate is not published, but it would normally be expected to be lower than that. The Government rate is calculated from time to time from the yield on Government stocks. I tried to explain that the short-term movement of gilt-edged was not a factor which would remain for very long and that there would be an adjustment between the yield of gilt-edged and equities. In calculating the Government credit rate, the attempt is made to even it out so that it would not fluctuate too rapidly, but normally one would expect the Government credit rate to be lower, and, as I have said, in the last year it has been between 3/4 per cent. below and level with the local authority market borrowing rate.
It would be abnormal for the Government credit rate to be higher than the quota rate charged by the Public Works Loan Board, and normal for it to be lower—in the past, it has varied between nothing and ¾ per cent.—and the variation, I am now informed, would be between 4¾ and 5¾ per cent. So the benefit is absolute to local authorities not yet borrowing up to their full quota short-term, and whose access to the Public Works Loan Board will, therefore, be of definite benefit, and will add a slight charge on the rate of interest for those authorities which are of course causing the most risk by having the highest proportion of their money on short-term.
I have tried to answer most of the points which have been made in the debate. There will be other opportunities to raise them, and I commend this Bill to the House.

Mr. Hannan: The hon. Gentleman will remember that I asked a question about paragraph 13. It is true I was absent from the House for just a few moments while he was speaking. I wonder whether he could clarify that at all—about the proposal for temporary borrowing and the charge being higher in Scotland?

Mr. Macmillan: I did, in fact, answer the hon. Gentleman in his

absence. Happily for Scotland, he has got it the wrong way round. The proposal is removing the disability which was on Scotland, and the treatment of Scotland is equal though not superior to that of England and Wales.

Question put and agreed to.

Bill accordingly read a Second time

Bill committed to a Standing Comittee pursuant to Standing Order No. 40 (Committal of Bills).

PUBLIC WORKS LOANS [MONEY]

[Queen's Recommendation signified]

Considered in Committee under Standing Order No. 88 (Money Committees.)

[Sir Robert Grimston in the Chair]

Resolved,
That, for the purposes of any Act of the present Session to make further provision with respect to loans out of the Local Loans Fund, it is expedient to authorise—
(a) the remission of unpaid balances of principal and all arrears of interest due to the Public Works Loan Commissioners in respect of any loans specified for that purpose in the said Act;
(b) any increase in the sums to be issued out of the Consolidated Fund or in the moneys to be raised under the National Loans Act 1939 which is attributable to any provision of the said Act of the present Session increasing the limit in section 2(1) of the Miscellaneous Financial Provisions Act 1950 on the sums which may be advanced to the Exchequer of Northern Ireland by way of loan under that section;
(c) the payment out of moneys provided by Parliament of any increase attributable to the said Act of the present Session in the sums so payable by way of Rate-deficiency Grant or Exchequer Equalisation Grant under the enactments relating to local government in England and Wales or in Scotland.—[Mr. Green.]

Resolution to be reported.

Report to be received Tomorrow.

ESTIMATES

Mr. David Webster discharged from the Estimates Committee: Mr. Anthony Royle added.—[Mr. Hughes-Young.]

NAVY, ARMY AND AIR FORCE RESERVES [MONEY]

Resolution reported,

That, for the purposes of any Act of the present Session to make further provision with respect to navy, army and air force reserves, it is expedient to authorise the payment out of moneys provided by Parliament of any increase in the sums so payable under any other Act attributable to any provision of the said Act of the present Session extending the operation of the Reinstatement in Civil Employment Act 1950 and the Reserve and Auxiliary Forces (Protection of Civil Interests) Act1951.

Resolution agreed to.

SCOTLAND (SCHOOLS CODE)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Peel.]

9.32 p.m.

Sir David Robertson: The matter I refer to tonight concerns the breaking of the law by the education authority in Caithness and by the Secretary of State for Scotland also, the law as laid down in the Schools (Scotland) Code, 1956, made on 8th June, laid before Parliament on 18th June, and coming into operation on 1st August.
This matter reached me on 17th July this year in Caithness, when I was asked to meet a body of citizens, including a number of teachers. I found it a very impressive meeting. I have forgotten many other meetings, but I will always remember that one, because they were extremely angry. They felt that this code, which lays down the regulations for Scotland, had been broken—and for no other purpose than to enable a certain person to get a job who was not qualified to get this job under this code.
The facts are as follows. There was a new school built in Penny land in 1962–63, I suppose to take up the additional children. Because of the siting of the atomic energy station in Dounreay, in Caithness, the population of Thurso, which used to be 3,000, has grown to about 10,000. I imagine that Miller Academy was bursting at the seams, and had too many children in the classes, and that this other school was built to relieve the pressure. The

director of education went up in May to Thurso from Wick, and he told the teachers in Miller Academy that the usual practice of advertising was not to be followed, but that the authority would try to take teachers in Miller Academy, who had become surplus, to the new school at Pennyland.
There was a fully qualified teacher, a Miss Grant, in Miller Academy, and she asked the director for the job. He said, "You are fully qualified, and have had 20 years' teaching experience, but we have not appointed a headmaster yet. We are going to advertise for one and it would hardly be fair to handicap a new headmaster with an infants' mistress without a year's probation".
Miss Grant said that under these conditions she would not dream of taking the job, although she had all the qualifications necessary, both by examination and experience. But it was only a ruse to keep her from getting the job. The director knew very well that no one with any spirit would accept a job under those conditions. That opened the door to the jobbery which came along afterwards.
On 19th July I wrote to the Secretary of State, giving all the facts. I always start like that. I never begin by putting in a Question to the Table. I have here a thick file of correspondence demonstrating my efforts to keep this case from becoming public and taking up the time of Parliament. It took a long time for a reply to arrive to my letter of 19th July. I did not accept that reply and so the thing went on. I was forced, in the end, to put down a Question. It will help hon. Members if I read out the exchange which took place in the House on 27th November last.
Sir D. ROBERTSON asked the Secretary of State for Scotland for what reason he has supported the temporary appointment of an infants mistress to a Thurso school who does not hold the qualifications appropriate to the post; and why no steps were taken to obtain applications for the appointment from teachers in Caithness or elsewhere who are qualified under the Schools (Scotland) Code, 1956.
Lady TWEEDSMUIR: As has been explained to the hon. Member, my right hon. Friend considers that the education authority acted reasonably. The teacher concerned was a certificated teacher already in their service and of proven ability, who undertook to obtain at summer courses the additional qualification necessary for a permanent appointment. The


authority already knew the appropriately qualified teachers in Caithness and their circumstances, and had given local teachers an assurance that promoted posts in this school would be filled as far as possible from teachers serving in it.
Sir D. ROBERTSON: When did it become possible for any Minister, either senior or junior, to override the law of Scotland and support a group who had broken it? Is the hon. Lady aware that this post is only one of dozens of posts and that all the others have been advertised but this one was not, and that the teachers of Caithness regard it as a piece of jobbery?
Lady TWEEDSMUIR: The Schools (Scotland) Code allows a certain amount of discretion to local school managers. The local authority's policy has, of course, been to fill promoted posts wherever possible. The teacher in question has been with the authority since 1958 and has undertaken to get the necessary infant mistress's endorsement
Mr. ROSS: Was there no one in the area with the requisite qualifications and, failing there being anyone in the area, was there no advertisement to ensure that somebody with the requisite qualifications could apply?
Lady TWEEDSMUIR: There was no advertisement of this post because the local authority had given an assurance to the local teachers that as far as possible it would try to fill the post from among the school's existing teachers, and the mistress in question had given very good service with great ability for some years and had undertaken to take the extra endorsement."—[Official Report, 27th November, 1963; Vol. 685, c. 252–3.]
I expressed dissatisfaction with my hon. Friend's replies and that is why we are discussing this tonight. I want to repeat her last words. She said:
…the mistress in question had given very good service with great ability for some years and had undertaken to take the extra endorsement
But the school opened in spring this year and I understand that now that they are found out this lady is to take the endorsement next year. The whole thing reeks of something radically wrong and the Scottish Education Department cannot be divorced from it.
There has never been a suggestion that Miss Grant, the first qualified lady in the Miller Academy, was other than a very competent teacher. In all this file of correspondence, there is not a word to suggest that. I hope that no such suggestion is made tonight. If it is, I will certainly deal with it. The post was never advertised. The post of the new headmaster was advertised, but every step was taken to ensure that this appointment came through.
During the years that I have been in the Northern Highlands I have found out from my early days that we have "fixers", people who can arrange things, curious people who are in the background and who wield some kind of influence. Without being immodest, I think I can say that I have forced a few of them out of business. I hope that it happens in this case, because this is a serious matter. Teachers are almost the most precious persons in this or any other country. Caithness has always had a very fine reputation, as have other Scottish counties and towns, for the quality of its teachers and teaching.
I felt that the men I met, the fellows who impressed me so much, had lost confidence and thought that if that kind of thing could go on it only pointed to the question, "What is the good of trying to teach children to behave and to be decent and honest citizens when jobbery of this kind can happen in a school?". I make it clear to my hon. Friend that I know the people concerned and that I have not the slightest doubt that this was complete jobbery and entirely contrary to the law. I am amazed that the Secretary of State for Scotland upheld it.

9.41 p.m.

Miss Margaret Herbison: Unlike the hon. Member for Caithness and Sutherland (Sir D. Robertson), I do not know any of the people involved in this case. I know nothing of the teacher who has been appointed and none of the teachers in the area. However, it seems to me that they have a just grievance. It is important that we should have somewhere like the House of Commons where that grievance can be aired and, perhaps, something done to get rid of it.
I have always understood that when an infants' mistress is appointed everything possible is done to get a woman teacher with the infants' mistress endorsement. That means a teacher not only qualified as a teacher in general subjects but one who has given her time—sometimes during the summer, and it may be a number of summers—to take further training resulting in her receiving the infants' mistress endorsement. I have also understood that before she receives such endorsement one of Her Majesty's Inspectors goes to her school


to examine her work, and that it is only on that examination, over and above the extra classes which she has taken, that the infants' mistress finally receives the endorsement.
My first question to the noble Lady is whether there was no single woman teacher in the whole of this education authority area, not just the town involved, with the infants' mistress endorsement. It is the strangest story that I have ever heard when a director of an education authority says to a group of teachers in one school, Miller Academy, that, whatever promoted posts are going in the new school, they will be confined as far as possible to the teachers of Miller Academy. That was another grave injustice to all the teachers outside that Academy, and to any teacher in Caithness who had the infants' mistress qualification. When a complaint was made, the Secretary of State for Scotland ought to have inquired why this promise had ever been given to any group of teachers instead of replying to my hon. Friend as he did, "Well, this was a promise that was made."
If a teacher at the Miller Academy had this; qualification, she ought to have been considered before any other teacher in that education area. It is true that the Regulations provide that under special, circumstances a teacher who has not the necessary qualification can be appointed, but what are these special circumstances? The situation must be such that it is impossible to find a teacher with the requisite qualifications who is willing to take the job. My information—and no doubt the Undersecretary of State will tell me if I am wrong—is that women teachers with the necessary qualification were available for the job. Those teachers had to stand aside. They were not even interviewed to see whether they were otherwise suitable for the job.
I have no complaint against the lady who was given the appointment. I do not know her, and she may be a very good teacher. My complaint is that this appointment has caused discontent among those in the teaching profession in that area. The Under-Secretary of State knows how difficult it is to attract people to the teaching profession. She

knows what a muddle she and her right hon. Friends are in over the proposed payment of an extra £50, yet we move from muddle to muddle on that question.
The hon. Lady and her right hon. Friend ought jealously to guard the position of qualified teachers. I understand, and I can well believe it to be true, that the other teachers feel a great sense of injustice. They are aggrieved and frustrated because of this appointment. When this sort of thing happens the teachers become the worst recruiters for their own profession, and the right hon. Gentleman should therefore safeguard their rights to avoid them feeling any sense of grievance or frustration.
This unqualified teacher is in charge of an infants' department, with authority over qualified teachers. She has promised the Director of Education, or the education authority, that she will obtain the necessary qualifications at some time in the future. What will happen if she fails to get that qualification? What will happen if she obtains it and one of Her Majesty's Inspectors, after examining her work, her standards, and her methods of teaching, decides that she should not be given the infants mistress endorsement?
That sometimes happens. What a position the lady herself would be in, and what a position the director of education and the education authority would be in. Were these points taken into consideration by the Secretary of State when they were brought to his notice by the hon. Member? Unless the Under Secretary has an overwhelming case to show why this lady and no other teacher in this area should have been appointed, after tonight the sense of grievance in this area will be greater than ever. The fact that a post in a bright new school to which so many people want to go was not advertised has created a great deal of suspicion.
I want to hear something better than this foolish statement that a promise was given that wherever possible the promotions would come from this school. I want to know what was the real reason why, when the headmaster's post was advertised, the post of infants' mistress was not similarly advertised.

9.50 p.m.

Sir Myer Galpern: Like my hon. Friend the Member for Lanarkshire, North (Miss Herbison), I have no first-hand knowledge of the circumstances of this case, but I place great reliance on the accuracy of the statements made by the hon. Member for Caithness and Sutherland (Sir D. Robertson). If the facts are as he has given them to the House this evening—and I have no reason to believe that they are not—there has been a grave miscarriage of justice to the teaching service in that area.
There is only one point about which I am not clear. I did not wish to interrupt the hon. Member, but I believe that he stated specifically that there was another teacher in the area who had the infants' mistress endorsement, and that he then made some qualification about a probationary period. I was not clear about that. Can he tell us what he meant by the probationary period?

Sir D. Robertson: This person is still at Miller Academy. She is fully qualified, with the Scottish three-year qualification, and she has been teaching for 20 years. The probation issue arose when she applied to the director of education for the job on 30th May, when he visited Miller Academy and spoke to the teachers. He was the man who said that it would not be fair to the headmaster, whom they had not yet engaged, to allow her to go there and take over as assistant mistress, and that she would need to undergo a probationary period of about a year.

Sir M. Galpern: The main point is that this lady had the infants' mistress endorsement, and the question was whether she should go to this school and serve first for a probationary period in order to see whether she would prove satisfactory to a headmaster who was still to be appointed. It seems strange that in the case of a teacher so qualified a headmaster still be to appointed had to be brought into the area first and had to vet the teacher. Surely the education authority itself was abundantly qualified to judge whether an individual was qualified—in terms of the academic requirements of the Act and the capabilities of the teacher—without reference to a headmaster still to be

appointed, asking him whether he would like Miss So-and-So to be the infants' mistress.
Now that this case has been brought to the House of Commons it will receive widespread publicity. It does not redound to the credit of the teaching profession or of the administration at St. Andrews House. Not long ago there were two similar cases in Glasgow, where teachers banded together and sent a protest to the Scottish Education Department referring to the proposed appointment of people whom they regarded as being not suitably qualified for certain posts because there were better qualified people, with longer periods of service, who had been passed over. On the occasion, the Scottish Office decided to hold up the appointments.
It seems a strange course of action that in the one case in Glasgow the Department decided to investigate the circumstances, and find whether there was a better qualified person for a particular promoted post than the one nominated by the education authority, yet in Caithness, where it would be more important to get a properly qualified teacher when one was so available, the Department took an entirely different action despite the protest of the hon. Member for Caithness and Sutherland.
It is not long ago, as hon. Members will recollect, that we were discussing how to attract more people to the teaching profession. Many speeches were made then about promotion. We spent a considerable time on that and we incorporated in the Bill permission to local authorities to meet the wishes of the teaching profession by allowing the profession to nominate to education authorities and to have a greater say in promotion and be properly treated. Here we have a glaring case of a deliberate attack. I cannot characterise the action as anything less than one to destroy the faith which the Department is anxious to build up in the profession.
This matter will cause repercussions throughout Scotland and through the entire profession. It will give rise to the feeling that one cannot get to the top unless one knows the right people; as the hon. Member for Caithness and Sutherland said, unless one knows the people who can fix things. That is


regrettable. I do not know what could be adduced against a teacher who has been callously passed over and who has the requisite qualifications, but has to submit herself to this iniquitous treatment and serve under a teacher who has not the requisite qualifications.
The very least that can be done to restore the faith of the people in the Caithness area and throughout Scotland generally in the belief that they will get a square deal by the Scottish Office is to ask this lady forthwith to resign her position and to restore the one who has the qualifications to this post. Too often in the past these promises have proved to be empty assertions on the part of teachers and once they have been put into posts under exceptional circumstances they usually have found some reason or other why they should not fulfil the promise they gave to acquire the higher qualification.
My experience in Glasgow has been that before the Scottish Education Department would allow us to appoint a teacher without the requisite qualifications it insisted that we should go through the motions of advertising the post. In this case, the Department seems to have dispensed with that, despite the fact that a serious attempt was made to do justice. I hope that unless the Under-Secretary can say something against the character of the person concerned, and can show that it is not possible for her to be in the charge of an infants' department, she will say that the Department will instal the teacher who was passed over and ask the other one to retire.

9.59 p.m.

The Under-Secretary of State for Scotland (Lady Tweedsmuir): We have had a forceful and characteristic speech by the hon. Member for Caithness and Sutherland (Sir D. Robertson) ably supported by the hon. Member for Lanarkshire, North (Miss Herbison) and the hon. Member for Glasgow, Shettleston (Sir M. Galpern). The words of the hon. Member from the far north did not accurately describe the circumstances of this case. Therefore, as he has been lucky enough to initiate this Adjournment debate with longer time available than is usually the case, I

should like to recapitulate, for the benefit of the House, the circumstances of this case.
I must take exception to the way in which the hon. Member attacked the education authority by using, once again, the word "jobbery" and even other words which I took down, such as that the members of the authority were "fixers" undertaking a ruse. The main point of this Adjournment is to draw attention to what my hon. Friend called a breach of the Schools (Scotland) Code. In my view, neither the suggestion of a breach is sound as he put it forward nor do I think, personally, that his attack on the authority is justified.

It being Ten o'clock, the Motion for the Adjournment of the House lapsed, without Question put.

Motion made, and Question proposed. That this House do now adjourn.—[Mr. G. Campbell.]

Lady Tweedsmuir: I should like to start with the rather narrow legal point of the terms of the Schools (Scotland) Code. The relevant sections are Regulations 4 and 5. Regulation 4 imposes certain requirements on authorities in making appointments to teaching posts. Briefly, these are that an education authority shall employ or arrange for the services of an adequate staff of certificated teachers holding the qualifications prescribed by the code for the posts in which they are employed.
The post in question in this case was that of an infant mistress. Regulation 5 prescribes that the appropriate qualification for an infant mistress is the Teacher's General Certificate with an endorsement to act as infant mistress.
If, however, we turn back to Regulation 4 we see that in certain circumstances—and this was brought out by the hon. Lady the Member for Lanarkshire, North—an authority may, at its discretion, appoint a teacher who is not qualified in terms of the code. The point at issue between the hon. Member and myself is whether the circumstances in this case were such that the authority was justified in appointing a teacher who, although certificated, did not hold the additional qualification appropriate for appointment as an infant mistress.
The hon. Gentleman described the circumstances, and I should like to go into a little more detail for the benefit of those hon. Members who have shown interest in the matter tonight. A new school, Pennyland Primary School, was opened at the beginning of the session 1962–63. The pupils entering the school were transferred from Miller Academy, which had become seriously overcrowded. In May, 1962, the director of education called a meeting of all primary teachers in Thurso and asked for volunteers to help staff the school. He explained to them that appointments to promoted posts within the school would be made, if possible, from among the staff recruited to the school and on the advice of the headmaster, once the headmaster had had time to see the staff in action. The hon. Member suggested that this probationary period, as he called it, would amount to at least a year. It was intended to amount to one term or, at the very most, two, but probably one term.
I should like shortly to go into greater detail over the circumstances of Miss Grant. It seems to me that in both these particulars—the taking of the local teachers into its confidence and the deferring of a final decision on promoted posts until the headmaster had had a chance to assess the quality of his staff—the authority went out of its way to follow the type of practice which teachers and hon. Members on both sides of the House have been advocating for many years—in other words, good, sound personal relationships.
The hon. Lady the Member for Lanarkshire, North may recall the report of the Working Party on Relations between Education Authorities and Teachers which was set up by my right hon. Friend's predecessor and which included representatives of teachers' associations. The working party considered the two methods normally adopted in the promotion of teachers—first, inviting applications by public advertisement from all teachers with appropriate qualifications, and secondly, giving preference to teachers already in the authority's service.
While the working party felt unable to express an opinion on the relative merits of these two methods, beyond saying that it would be undesirable for

either to be followed too rigidly, it pointed out that the second
which is designed to give teachers reasonable prospects of promotion within a more restricted area, has obvious advantages for the teachers in areas where it is practised.

Miss Herbison: I have no objection at all to the part which the noble Lady has read from the Report. Indeed, that was what I based my case on. I said the whole education authority area, whereas this was confining any promoted post to one school in the area. What the hon. Lady quoted to us in no way supports her case. It supports my case.

Lady Tweedsmuir: Before returning to that point, I should like to continue by saying this. On the first method—advertisement—it is possible to say now, looking back on all these circumstances, that perhaps the authority would have been wiser to have advertised the post, as the hon. Lady said, perhaps throughout Scotland as well as in Caithness.
But it is very important to keep a proper sense of proportion and to bear in mind the following factors. First, it has been the authority's practice for many years to promote as far as possible teachers who are already in service with the authority and hold posts in the schools concerned. Secondly, this practice has been warmly endorsed by the local teachers. Indeed, this appointment is no exception. I understand that it is very popular in Pennyland School. I understand that it is in the few cases where the authority has felt impelled to advertise that it has met with opposition from teachers in its service.

Miss Herbison: If the hon. Lady has a case, she is ruining it. I have tried to explain that I accept that most local authorities for a position of infant mistress do the advertising through the schools but covering the whole area over which they have control. We have no objection to that. That is what we say should have been done in this area.

Sir M. Galpern: Does not the Scottish Education Department, before allowing the code to be broken by the appointment of a teacher not qualified for a specific post, insist upon advertising? Only when the authority can show that it was unable to attract any applicants for the post should the Department give power to appoint somebody who is not qualified.

Lady Tweedsmuir: The answer is "No, Sir", because, as I have already explained, the School (Scotland) Code allows these two methods, one of which does not involve the advertisement to which the hon. Gentleman refers. I must conclude the description of this case, because unless it is seen as a whole, these interruptions rather impede the flow of the argument. It must be remembered that Caithness, as the hon. Member who represents it knows very well, is an exceptionally sparsely populated county. So it is possible for the education authority to know the disposition and quality of the staff whom it can draw in a way which would be quite impossible in a more populous area.
I return to the point raised by the hon. Lady about the teachers who were or were not available in the area.

Mr. E. G. Willis: If the authority knew the qualifications of these teachers so well, why the year's probation?

Lady Tweedsmuir: I fear that the hon. Gentleman, who usually listens with such attention to what is said in the House, did not hear me say that it was not a year's probation, but one term or, at the most, two.
One of the teachers to whom the post was made known at this stage held the infants' mistress endorsement. This was the Miss Grant to whom reference has been made. She volunteered to transfer to the new school and the expectation was that she would have been appointed to the post of infant mistress in due course. Unfortunately, however, shortly after the meeting at which the director of education made known his plans for the staffing of the school, she withdrew her application on the ground that she was a sufficiently experienced teacher to be given the job straight away without the headmaster assessing her work in the new school.
It is probably quite clear that had she continued with her original application—this is almost certainly so—she would have been appointed infants' mistress at the end of the second term. It was made clear to her that her pay would probably have been backdated to the beginning of her appointment there. However, she withdrew and, as a result, the other lady—who has not been named tonight; she

is a Mrs. pearson, a certificated teacher who does not hold the appropriate endorsement—carried out the duties of infants' mistress acting in an unpaid capacity.
She proved in the eyes of the headmaster and our District Inspector of Schools to be an excellent teacher for the job. Accordingly, in April, 1963, the headmaster recommended that she should be formally appointed to the post. Because the teacher did not hold the additional qualification prescribed by the code, the authority could not appoint her to a permanent post without the approval of the Secretary of State. However, the authority was within its rights to appoint her, as it did, on a temporary basis without reference to my right hon. Friend.

Sir D. Robertson: Would my hon. Friend quote the words from the code which cover that point?

Lady Tweedsmuir: Certainly, I had intended to come to that. There appear to be a large number of interventions from the hon. Member for Caithness and Sutherland tonight.
The hon. Member for Shettleston asked how anyone could be assured that Mrs. Pearson's wish to take the course which would entitle her to the infants' mistress endorsement was not merely hopeful aspirations. Would that not mean that she would remain indefinitely in a kind of temporary post without getting the endorsement he asked. It was unfortunate that she did not start the course then, due to domestic and personal reasons. Because she has to go to a College of Education, she will have to take the course for two periods, in 1964 and 1965. It is perfectly clear, however, that if she cannot get these qualifications something else will have to be done.
As the hon. Member for Caithness and Sutherland strenuously pointed out, where teachers who do not hold the appropriate qualifications for a particular post are appointed temporarily to it, the authority is enjoined, in terms of the code, to continue to "take all reasonable steps" to recruit teachers with these qualifications. I fully accept that it is a natural and reasonable interpretation of this section of the code that an authority should advertise the post


or circularise it among its own staff, depending on the policy it follows in this matter.
But in the circumstances of this case the Authority took the view that, first, this would be pointless, since from its knowledge of the disposition of the staff in its area it was sure that it would not get any suitable applicants; and, secondly, that this would be undesirable, since in its consultations with the local primary school teachers it had given an undertaking that promoted posts in the school would be filled by teachers recruited to it.
Furthermore, they thought that it was unnecessary because the certificated teacher appointed in a temporary capacity had undertaken to obtain the appropriate qualifications by courses of in-service training. It was quite clear in her mind and in the mind of the authority at the time of her appointment that she should take the appropriate training course. I should explain why this course will take so long. Teachers living near colleges of education can take the college classes on Saturday mornings, but those living outside travelling distance must take the classes in two successive summer courses of two weeks each.
As the hon. Lady the Member for Lanarkshire, North pointed out, during school session both they and teachers attending Saturday morning classes receive practical supervision in the form of visits from college lecturers and there are of course visits from inspectors of schools.
Normally, new infants' mistress courses start at Moray House and Jordanhill each year, but at Dundee and Aberdeen, which are the nearest, only every second year because of the smaller number of applicants. In the summer of 1964, Aberdeen College will be doing the second part of the course only and it is expected that Mrs. Pearson will go to the Jordanhill courses. All this, the original meeting and the opening of Pennyland, took place in August, 1962, at which time the director of education informed the Educational Institute of Scotland of these matters. No objection whatsoever was raised by them until June, 1963. I think that in the circumstances of this case, realising that it is

a temporary appointment and that these summer courses are going to be undertaken, the authority, which has latitude under the Schools (Scotland) Code, is acting in a reasonable way.
I would also say, particularly because of the pleas made by two hon. Members opposite who spoke of the shortage of teachers and the difficulty of getting them in all parts of Scotland, that I hope that the pressure of publicity which has resulted from the zeal of the hon. Member for Caithness and Sutherland in alleging a breach of the regulations, does not have the one serious and important effect of forcing out of service a good teacher whom we can ill afford to lose. I understand that the teacher concerned, Mrs. Pearson—and I think that the House of Commons always recognises these personal problems of a particular teacher—in view of the publicity is under a great nervous strain. She is said to have asked for and to have received police protection from reporters and, in the words of the director of education:
If this goes on much longer I will not have an infants' mistress.

Sir D. Robertson: Will the hon. Lady read to the House, and not slur over it as she did in her speech, the exact clause or subsections where she justifies the appointment of an unqualified person when there are qualified persons available? I have not found it, nor have the lawyers who have been looking into this case for the Institute in Caithness.

Lady Tweedsmuir: If the hon. Gentleman will look at the Schools (Scotland) Code, of which I sent him a copy and, therefore, I know that he has it, he will find on page 5 in Regulation 4(3,b) that it is laid down that the education authority may
appoint temporarily to the said post a certificated teacher who does not hold the qualifications appropriate to the post or an uncertificated teacher, provided that they shall continue to take all reasonable steps to obtain applications for appointment to the post from certificated teachers holding qualifications appropriate to the post.
Then, in Regulation 5(2), it is provided that one must have the necessary infant endorsement.
As I pointed out earlier, and as the Report of the Working Party on the Relations between Education Authorities


and Teachers said, there are the two main methods of proceedings, either by advertisement or by promotion from among teachers in the employ of the local authority. Therefore, in the circumstances, in view of the assurance given that a very able teacher will get the extra endorsement, I hope that the hon. Gentleman will feel that this lady should be left in peace to carry on her excellent work.

10.21 p.m.

Mr. E. G. Willis: The Under-Secretary of State has given a most unsatisfactory answer to the debate. Nobody wishes to place the lady who is now the infants' mistress in an uncomfortable position, but, at the same time, one has to see that justice is done to the other lady. By far the greater part of the Under-Secretary of State's speech was devoted to a justification of this appointment. It seemed to me that she protested too much. This was not so much in question as the manner in which the other lady was treated.
As I understand them, the facts are quite simple. Here was a lady with 20 year's experience, fully qualified, with her endorsement, and, in the words of the noble Lady herself, working under an authority in which the education committee and the education officer would know her qualifications and record. She offers herself for the post. I am not quite sure what happened then, but, as I understand, she was told that she had to serve a probation period. In fact, the headmaster was not even appointed, so I do not know who said this.
This seems to be an intolerable situation in which to put a lady with this record. Quite rightly, she asked, "Why should I have to serve this probation period?". The noble Lady has spoken for 20 minutes, but she has not told us why this particular infants' mistress had to serve a probation period. Why was she told? If she had not been told that, the whole business would not have arisen. Is this customary in the circumstances? These are the questions to which we should have answers, but we are still left asking ourselves why Miss Grant was not appointed.
Why was Miss Grant subjected to such treatment? Did the education

officer or the education committee have information about her which would disqualify her or lead the committee to say, "True, you have served us very well for 20 years. You are very competent. You are highly qualified. But, in spite of all this, we are going to make you serve a probation period"?
It is an intolerable state of affairs. The hon. Member for Caithness and Sutherland (Sir D. Robertson) has an excellent case, and the noble Lady has not yet answered it. She has said nothing at all about the matters which I have raised, which seem to me, at least, to be at the kernel of the case.

Mr. A. Woodburn: If I understood it correctly, the part of the code which the noble Lady read out assumed that the appointment of an unqualified or un-certificated person was that the authority had not yet found anyone else. I gather that when a temporary appointment is made, it is the business of the authority to get busy and find someone with the necessary qualifications. Although it is not said directly, the inference seems to be that it is only permissible to make this type of temporary appointment when there is no person with the requisite qualifications available. Can the noble Lady confirm that?

Lady Tweedsmuir: With the leave of the House, I should like to speak briefly again.
The hon. Member for Edinburgh, East (Mr. Willis) asked me specifically why Miss Grant was asked to serve, as he calls it, a probationary period. It was because appointment to a promoted post, which is what is in question, is not a matter of right on the basis of qualifications. It is made on merit as well. It seemed reasonable that, in anew school with a new headmaster, he should have some say in the appointment and the final promotion of those who were going to serve in the school.

Mr. Willis: The noble Lady will recall that during her speech she told us that the very fact that this was a small authority meant that the education officer knew the qualifications of the people in it. Anyone who knows Caithness knows that this is not a large authority. The numbers involved are very small. As the noble Lady quite


rightly said, the education officer knew what this woman was like. He had employed her for 20 years and knew all about her. Therefore, why was she required to undergo a probationary period?

Miss Herbison: Since the noble Lady is so keen to support the idea that the lady in question should have a probationary period under a headmaster who had not yet been appointed, may I ask under whom the headmaster should have served his probationary period to discover whether he was suitable? Does not the noble Lady think that it was a shocking indignity to put on the head of any woman to say that she had to be vetted by a headmaster who had not to serve a probationary period?
The Under-Secretary of State cannot put the onus on us for the trouble that the lady doing the job, and perhaps doing it very well, is suffering. That trouble stems from the injustice which has run right through this case.

Lady Tweedsmuir: I think that the matter which has really distressed the education authority and committee very much is the words used by the hon. Member for Caithness and Sutherland accusing them of jobbery, and of being fixers and much worse things. I understand that they are very upset about that indeed.
The right hon. Member for Clackmannan and East Stirlingshire (Mr. Woodburn), if I can remember his question rightly, asked whether this should have been done only by public advertisement or whether there was any other method by which the appointment could be made?

Mr. Woodburn: The noble Lady read out a condition in the code. I gathered that the inference was that only if somebody with suitable qualifications could

not be found should a temporary appointment be made and that thereafter, at the earliest possible moment, someone with the necessary qualifications should be found. Since that is said, is there not clearly an unwritten instruction that only qualified people should be appointed?

Lady Tweedsmuir: I thought that the right hon. Gentleman had not quite heard what I said. This lady is a certificated teacher, but she needs the extra endorsement. She is not an uncertificated teacher. The provision in the code which I read out says that the authority has discretion to appoint temporarily—this is a temporary appointment—a teacher and after that to take all reasonable steps to get a fully qualified teacher. The reasonable steps which it is taking are to ensure that this particular certificated teacher shall take, through summer courses, the infant mistress endorsement which will ensure that she is a fully qualified teacher.
Surely the real point behind this debate is whether, taking into account the discretion which is clearly given within this code to local authorities and which I have read out this evening, the authority has acted in a reasonable manner in a sparsely populated district in opening a new school and trying to make a success of it with teachers who have been in their employment for some time. I suggest to the House that when Miss Grant withdrew her application the authority acted in a reasonable manner to give—

The Question having been proposed at Ten o'clock and the debate having continued for half an hour, Mr. Deputy-Speaker adjourned the House without Question put, pursuant to the Standing Order.

Adjourned a half-past Ten o'clock.